Download - DRAFT REPORTdocumenting the full set of data, analysis, assumptions, and findings follows. Results are provided for the 2005 to 2025, 20‐year period, reflective of typical planning

Economic &

Planning Systems Real Estate Economics Regional Economics Public Finance Land Use Policy

B E R K E L E Y 2501 Ninth St., Suite 200 Berkeley, CA 94710-2515 www.epsys.com

Phone: 510-841-9190 Fax: 510-841-9208

S A C R A M E N T O Phone: 916-649-8010 Fax: 916-649-2070

D E N V E R Phone: 303-623-3557 Fax: 303-623-9049

DRAFT REPORT

SAN MATEO COUNTY HOUSING NEEDS STUDY Prepared for: City/County Association of Governments of San Mateo County County Department of Housing Housing Endowment and Regional Trust (HEART) Prepared by: Economic & Planning Systems, Inc. November 2006 EPS #15099

TABLE OF CONTENTS

EXECUTIVE SUMMARY................................................................................................1

I. INTRODUCTION ........................................................................................................13

Purpose of Report ...................................................................................................13 Approach and Methodology..................................................................................13 Organization of Report...........................................................................................14

II. EXISTING HOUSING CONDITIONS.............................................................................15

Overview of Housing Market................................................................................15 For‐Sale Market.......................................................................................................15 Rental Market..........................................................................................................15 Availability of Existing Housing Stock .................................................................20 Commuting .............................................................................................................20 New Developments ................................................................................................23

III. HOUSING NEEDS ANALYSIS .....................................................................................27

New Worker Households ......................................................................................27 Results......................................................................................................................29 Total Housing Need ...............................................................................................33

IV. HOUSING SUPPLY ANALYSIS....................................................................................39

General Approach...................................................................................................39

Housing Supply Scenario 1....................................................................................39 Housing Supply Scenario 2....................................................................................42

V. PROJECTED HOUSING DEFICITS/SURPLUSES.............................................................44

Worker Housing Need Comparison .....................................................................44 Total Housing Need ...............................................................................................49 Conclusions .............................................................................................................56

TABLE OF CONTENTS (continued)

VI. AFFORDABILITY GAP AND LINKAGE FEES................................................................57

Affordability Gap....................................................................................................57 Affordable Housing Payments ..............................................................................57 Total Affordability Gap..........................................................................................59 Linkage Fee .............................................................................................................63 Worker Housing Need ...........................................................................................63 Maximum Linkage fee ...........................................................................................64 Financially Feasible Linkage Fee ...........................................................................64

VII. HOUSING ELEMENT UPDATE ...................................................................................67

LIST OF FIGURES AND TABLES

Figure S‐1: San Mateo County Jobs and Household Formation 2005‐2025....................2 Figure S‐2: San Mateo County Housing Need by Income Level ....................................5

Figure S‐3: San Mateo County Subregions .......................................................................6 Figure S‐4: San Mateo County Housing Need by Subregion..........................................7 Figure S‐5: San Mateo County Housing Supply by Subregion.......................................9 Figure S‐6: Subsidy Required by Income Group............................................................11

Table S‐1: San Mateo County Housing Need, 2005‐2025...............................................4

Table S‐2: Projected Housing Need versus Housing Supply by Subregion, 2005‐2025........................................................................................................11

Table 1: San Mateo County Housing Units, 2005......................................................17

Table 2: San Mateo County Home Sales Activity by City, 2004‐2005......................18

Table 3: Estimated Link between Household Income and Affordable Housing Costs ...............................................................................................................19

Table 4: San Mateo County Age of For‐Rent Residential Inventory, 2005..............20

Table 5. San Mateo County For‐Rent Residential Unit Mix, 2005............................22

Table 6. San Mateo County For‐Rent Residential Summary by City, 2005.............23

Table 7. San Mateo County Head of Household Residents Who Work Elsewhere by Industrial Sector and Occupation, 2000 ...............................25

Table 8. San Mateo County Head of Household Workers Who Live Elsewhere by Industrial Sector and Occupation, 2000 ...............................26

Table 9. New Developments in San Mateo County ..................................................27

Table 10: San Mateo County Employment Projections by Industry, 2005‐2014 .......31

Table 11: San Mateo County Worker Household Formation by Industry Sector and Occupation, 2005‐2025...........................................................................32

Table 12. San Mateo County Income Distribution of Worker Housing Units, 2005‐2025........................................................................................................33

Table 13: San Mateo County Income Distribution of Worker Housing Units by Tenure, 2005‐2025.....................................................................................35

Table 14: San Mateo County Affordability Distribution of Worker Housing Units by Tenure, 2005‐2025...........................................................................36

Table 15: San Mateo County Income Distribution of Worker and Non‐Worker Households, 2000 ..........................................................................................37

LIST OF FIGURES AND TABLES (continued)

Table 16. San Mateo County Income Distribution of Worker and Non‐Worker Housing Units Need by Tenure, 2005‐2025.................................................39

Table 17. Proportion of Housing Supply Affordable to Different Income Groups..41

Table 18. Scenario 1: San Mateo County Housing Projection, 2005‐2025.................42

Table 19. Scenario 2: San Mateo County Housing Projection, 2005‐2025..................44

Table 20. Projected Housing Supply versus Worker Household Need, 2005‐2025........................................................................................................46



Table 23: Projected Housing Supply versus Worker Household Need for Ownership Units, 2005‐2025...................................................................51

Table 24: Projected Housing Supply versus Worker Household Need for Rental Units, 2005‐2025 ...........................................................................53

Table 25: Projected Housing Supply versus Worker and Non‐Worker Household Need, 2005‐2025.........................................................................55

Table 26: Projected Housing Supply versus Worker and Non‐Worker Household Need, 2005‐2014.........................................................................56

Table 27: Affordable Housing Income Range, 2005....................................................59

Table 28: Income and Affordable Housing Assumptions, 2005.................................61

Table 29: Unit Characteristics and Per Unit Subsidy Required .................................62

Table 30: Affordability Gap by Subregion...................................................................63

Table 31: Worker Households by Workspace per Prototype.....................................66

Table 32: Illustrative Employment Linkage Fee Calculation .....................................67

1 P:\15000s\15099SanMateoHsng\Report\15099SMC_112906.doc

EXECUTIVE SUMMARY

The City/County Association of Governments (C/CAG) of San Mateo County in association with the County Department of Housing and the Housing Endowment and Regional Trust (HEART) retained Economic & Planning Systems, Inc. (EPS) to conduct a housing needs analysis for San Mateo County. The housing needs analysis compares projected housing need to housing supply to estimate the size of expected housing deficits. This analysis updates the 1998 San Mateo County Housing Needs Analysis also conducted by EPS. This section provides a summary of the findings of the analysis. A full report documenting the full set of data, analysis, assumptions, and findings follows. Results are provided for the 2005 to 2025, 20‐year period, reflective of typical planning horizons, in addition to the 2005 to 2014 period, reflective of the current Regional Housing Needs Determination (RHND) cycle. Key findings include the following: 1. New job growth in San Mateo County is expected to result in the formation of

68,000 new households, 48,000 new households of them in San Mateo County, between 2005 and 2025 (see Figure S‐1).

The Association of Bay Area Governments (ABAG) 2005 projections estimate an increase of 133,300 jobs in San Mateo County between 2005 and 2025.1 This represents a 40 percent increase over its current 336,500 job count, an average annual increase of 1.7 percent. This job growth will result in the formation of about 68,000 new worker households. Taking account of Metropolitan Transportation Commission (MTC) projections concerning increases in in‐commuting and out‐commuting, the future number of new worker households living in San Mateo County is projected at 48,000. This is due to the projection of significantly higher levels of County in‐commuting than out‐commuting in the future. The other 20,000 new worker households are associated with the net new workers in‐commuting into San Mateo County. Accounting for typical vacancy rates, this represents a need for 49,100 housing units. Between 2005 and 2014 job growth is expected to result in 21,600 additional worker households in San Mateo County and an associated need for 22,100 housing units.2

1 The ABAG job projections are the most detailed projections available for cities and counties in the San Francisco Bay Area. The projections are based on past trends, surveys of local planners, as well as assumptions concerning land use policies, housing availability, and commute patterns. The projections may be aggressive as they are based in part on assumptions about changes in land use policies to encourage infill and transit oriented development. ABAG is in the process of finalizing its 2007 projections. 2 Figures for 2005 to 2014 are estimated as a proportion of the 2005 to 2025 figures.

Figure S-1San Mateo County Jobs and Household Formation 2005-2025San Mateo County Housing Needs Assessment; EPS #15099

San Mateo County Jobs and Household Formation 2005-2025

133,300

68,10048,000

22,600

70,600 72,900

0

40,000

80,000

120,000

160,000

200,000

San MateoCounty New Jobs

New WorkerHouseholds

New WorkerHouseholds

Formed in SanMateo County

New Non-workerHouseholds

Formed in SanMateo County

Total NewHouseholds in

San MateoCounty

Total HousingUnits Required in

San MateoCounty

Economic & Planning Systems, Inc. 12/1/2006 P:\15000s\15099SanMateoHsng\Model\execsumtbls_112806.xls

2

Draft Report San Mateo County Housing Needs Study

November 30, 2006


2. Total household formation in San Mateo County between 2005 and 2025 will be significantly greater than the worker driven households and is projected to be 70,600 new households, with 31,800 of these new households formed between 2005 and 2014.

Housing need is composed of worker households as well as non‐worker households, including retirees, students, and unemployed households, among others. In 2000, the County consisted of a total of 254,200 households, including 172,800 worker households and 81,400 non‐worker households. As the population and number of households increase over time in the County, and especially as increasing numbers of workers from the baby boom generation retire, the number of non‐worker households in the County will increase significantly. If the current ratio of worker to non‐worker households continues, an additional 22,600 households would be formed in San Mateo County in addition to the 48,000 worker‐related households (see Table S‐1). 3. A total of 72,900 housing units will be required to accommodate the new households

over the 20‐year period with over 50 percent of this housing need associated with low‐, very low‐, and extremely low‐income households.3

Household formation patterns were converted into housing need assuming a 2.5 percent structural vacancy rate. A total of 72,900 new housing units will be required to accommodate the new households formed between 2005 and 2025 in San Mateo County (see Figure S‐1). Job‐driven worker housing need totals 49,100 units of which about 40 percent (21,000 housing units) is associated with low‐ or below‐income households. Non‐worker housing need totals 23,800 units of which over 70 percent (17,200 units) is associated with low‐ or below‐income households (see Table S‐1 and Figure S‐2). A total of 32,800 units will be required in the County between 2005 and 2014. 4. The North County subregion will generate the highest housing need, followed by the

Mid County and South County regions, with the Coastal area making up the rest. Figure S‐3 shows the breakdown of the County into four subregions: North County, Mid County, South County, and the Coastal area. Between 2005 and 2025, over 30,300 units (40 percent) of the housing need is projected in the North County, 24,700 units (34 percent) in the Mid County, and 17,360 units (24 percent) in the South County. An additional 535 housing units are required in the Coastal area (see Figure S‐4).

3 San Mateo County 2005 definitions include (1) extremely low income households make less than 35 percent of Countywide median income; (2) very low income households make less than 60 percent of median income; (3) low income households make less than 95 percent of median income; (3) moderate income households make less than 120 percent of median income. The County median income used for the purposes of this analysis is $85,500 (2005 dollars) and represents the existing median for a 3‐person household. Households making less than $81,500 each year will fall in either the low‐, very low‐, or extremely low categories.

Table S-1San Mateo County Housing Need, 2005-2025San Mateo County Housing Needs Assessment; EPS #15099

Household Income (1) Category

Worker Household

Need (units)

Non Worker Household

Need (units)

Total Housing

Need (units)

$0 - $30,550 Extremely Low Income 3,808 7,937 11,745$30,551 - $50,900 Very Low Income 6,331 4,393 10,724$50,901 - $81,450 Low Income 10,847 4,887 15,734$81,451 - $85,500 Moderate (Below Median) 1,420 444 1,864$85,501 - $102,600 Moderate (Above Median) 5,302 1,731 7,033

More than $102,600 Above Moderate Income 21,396 4,399 25,795

Total 49,104 23,791 72,895

Sources: Economic & Planning Systems, Inc.


4

Figure S-2San Mateo County Housing Need by Income Level 2005-2025San Mateo County Housing Needs Assessment; EPS #15099

San Mateo County Housing Need by Income Level 2005-2025

16%

15%

21%3%10%

35%

$0-$30,550 $30,551-50,900 $50,901-$81,450$81,451-$85,500 $85,501-$102,600 More than $102,600

11,700 units

10,700 units

15,700 units1,900 units7,000 units

25,800 units


5

0 1.5

Miles

3

CoastalCoastalCoastalCoastalCoastalCoastalCoastalCoastalCoastalUnincorporatedUnincorporatedUnincorporatedUnincorporatedUnincorporatedUnincorporatedUnincorporatedUnincorporatedUnincorporated

AreaAreaAreaAreaAreaAreaAreaAreaArea

San MateoSan MateoSan MateoSan MateoSan MateoSan MateoSan MateoSan MateoSan Mateo

Foster CityFoster CityFoster CityFoster CityFoster CityFoster CityFoster CityFoster CityFoster City

San MateoSan MateoSan MateoSan MateoSan MateoSan MateoSan MateoSan MateoSan Mateo

MenloMenloMenloMenloMenloMenloMenloMenloMenloParkParkParkParkParkParkParkParkPark

EastEastEastEastEastEastEastEastEastPalo AltoPalo AltoPalo AltoPalo AltoPalo AltoPalo AltoPalo AltoPalo AltoPalo Alto

RedwoodRedwoodRedwoodRedwoodRedwoodRedwoodRedwoodRedwoodRedwoodCityCityCityCityCityCityCityCityCity

Daly CityDaly CityDaly CityDaly CityDaly CityDaly CityDaly CityDaly CityDaly CityBrisbaneBrisbaneBrisbaneBrisbaneBrisbaneBrisbaneBrisbaneBrisbaneBrisbane

ColmaColmaColmaColmaColmaColmaColmaColmaColma

South San FranciscoSouth San FranciscoSouth San FranciscoSouth San FranciscoSouth San FranciscoSouth San FranciscoSouth San FranciscoSouth San FranciscoSouth San Francisco

PacificaPacificaPacificaPacificaPacificaPacificaPacificaPacificaPacificaSan BrunoSan BrunoSan BrunoSan BrunoSan BrunoSan BrunoSan BrunoSan BrunoSan Bruno

MillbraeMillbraeMillbraeMillbraeMillbraeMillbraeMillbraeMillbraeMillbrae

BurlingameBurlingameBurlingameBurlingameBurlingameBurlingameBurlingameBurlingameBurlingame

MontaraMontaraMontaraMontaraMontaraMontaraMontaraMontaraMontara

Moss BeachMoss BeachMoss BeachMoss BeachMoss BeachMoss BeachMoss BeachMoss BeachMoss BeachBelmontBelmontBelmontBelmontBelmontBelmontBelmontBelmontBelmontEl GranadaEl GranadaEl GranadaEl GranadaEl GranadaEl GranadaEl GranadaEl GranadaEl Granada

Half Moon BayHalf Moon BayHalf Moon BayHalf Moon BayHalf Moon BayHalf Moon BayHalf Moon BayHalf Moon BayHalf Moon Bay

San CarlosSan CarlosSan CarlosSan CarlosSan CarlosSan CarlosSan CarlosSan CarlosSan Carlos

AthertonAthertonAthertonAthertonAthertonAthertonAthertonAthertonAtherton

WoodsideWoodsideWoodsideWoodsideWoodsideWoodsideWoodsideWoodsideWoodside

West Menlo ParkWest Menlo ParkWest Menlo ParkWest Menlo ParkWest Menlo ParkWest Menlo ParkWest Menlo ParkWest Menlo ParkWest Menlo Park

Portola ValleyPortola ValleyPortola ValleyPortola ValleyPortola ValleyPortola ValleyPortola ValleyPortola ValleyPortola Valley

HillsboroughHillsboroughHillsboroughHillsboroughHillsboroughHillsboroughHillsboroughHillsboroughHillsborough

Figure S-3: San Mateo County Subregions

Economic & Planning Systems, Inc. P:\15000s\15099SanMateoHsng\Maps\MapInfo\Fig_02.wor

San Mateo County Subregions

CoastalEast Palo AltoMid-CountyNorth CountySouth County

6

Figure S-4San Mateo County Housing Need by Subregion 2005-2025San Mateo County Housing Needs Assessment; EPS #15099

San Mateo County Housing Need by Subregion 2005-2025

41%

34%

24%1%

North County Mid County South County Coastal

17,400 units

540 units

24,700

30,300 units


7


November 30, 2006


5. At present, there are minimal vacancies and high home prices in the San Mateo County housing market, clear indications of an undersupply of housing affordable to households making less than the median income.

The average Countywide vacancy rate at 2.5 percent represents a structural vacancy associated with normal turnover. As a result, there is no excess capacity among the existing housing stock to accommodate new household formation. Current housing conditions also indicate a significant, undersupply of housing. The San Mateo County 2000 Housing Element indicated 31,000 units, 11.9 percent of the total, were overcrowded and that households in 63,000 units, 24.2 percent of the total, put more than 30 percent of their income towards housing costs.4 6. To date, neighboring counties have not provided a significant net supply of housing

for San Mateo County workers. The MTC projects this to change, reducing the overall housing need in San Mateo County.

As of 2000, about half of San Mateo County workers lived in the County and half lived outside. At the same time, about half the employed residents of San Mateo County worked inside the County and half worked outside. As a result, while San Mateo County workers formed about 80,500 households in other counties, San Mateo County provided housing for about 76,200 households who worked elsewhere. This relative balance is projected to change significantly over the next twenty years. MTC expects the increase in new in‐commuters to San Mateo County jobs to be over double the number of new out‐commuters to jobs elsewhere. The net in‐commute is estimated at about 30 percent of new San Mateo County jobs. This assumption, that a net 20,000 worker households associated with San Mateo County jobs are formed outside of the County because of insufficient housing supply and other reasons, reduces the new San Mateo County worker housing demand estimated in this Report for 2005 and 2025 from about 69,500 units (without the net increase in in‐commuting) to about 49,000 units. 7. Future housing supply to be developed in the County is expected to be between

23,900 and 37,900 new housing units between 2005 and 2025 (see Figure S‐5). ABAG’s 2005 projections provide a projection of new households between 2005 and 2025 (Scenario 1). When a structural vacancy rate of 2.5 percent is incorporated, these ABAG projections suggest a housing supply of 37,900 housing units, including 12,700 units in North County, 12,000 in Mid County, and 11,500 units in South County. A second projection of housing supply based on the historical rate of housing development between 1995 and 2005 implies a lower level of housing construction of about 23,900 housing units between 2005 and 2025 (Scenario 2). This includes 8,000 units in North County, 5,600 units in Mid County, and 7,300 units in South County. The division of housing supply between different household income groups/affordable housing costs

4 The number of housing units in San Mateo County in 2000 was 260,600. Overcrowding was defined as units with more than one person per room.

Figure S-5San Mateo County Housing Supply by Subregion 2005-2025San Mateo County Housing Needs Assessment; EPS #15099

San Mateo Housing Supply by Subregion 2005-2025

12,700

8,000

12,000

5,600

11,500

7,300

1,7002,900

0

4,000

8,000

12,000

16,000

Scenario 1 Scenario 2 Scenario 1 Scenario 2 Scenario 1 Scenario 2 Scenario 1 Scenario 2


Hou

sing

Sup

ply

(uni

ts)


9


November 30, 2006


was estimated based on the MTC Travel Model Systems. This model estimates that about 74 percent of new housing development between 2005 and 2025 will be affordable to households making more than moderate income, 11.5 percent affordable to those making moderate incomes, and 14.5 percent affordable to those in the low income or below categories.5 The same distribution was used for both scenarios. 8. The comparison of projected housing need with housing supply suggests a

significant deficiency in housing provision at all income levels except for households earning greater than moderate incomes.

The comparison of worker housing need to any of the housing supply projections indicates a significant shortfall in housing production, even when non‐worker households are not taken into account. A total housing deficit of 35,000 units is projected between 2005 and 2025 under Scenario 1 housing supply projections. All of the housing need of households with greater than moderate incomes will be accommodated; about 50 percent of the need of those with moderate incomes; and about 15 percent of the need of low‐, very low‐, and extremely low‐income households. A deficit of about 32,500 housing units for low‐, very low‐, and extremely low‐households is projected, representing over 1,600 units each year. If current housing construction trends continue, the housing deficit will be even greater (Scenario 2) at 49,000 units over the 2005 to 2025 period, with significant housing deficits at all income levels (see Table S‐2). 9. A subsidy of over $6.0 billion in 2006 dollar terms would be required to cover the

affordability gap associated with the housing deficit between 2005 and 2025, equivalent to over $300 million each year (see Figure S‐6).

The affordability gap represents an expression of the total projected housing deficit over the next twenty years in terms of the subsidy required to bridge the gap between development cost and affordable housing payment. The affordability gap by unit, based on a consideration of rental housing, ranges from $308,000 per unit for extremely low income households to $37,000 per unit for households making between 95 and 100 percent of median income. Housing developments aimed at households making over median household income are assumed not to require a subsidy. The estimated affordability gap/subsidy is a conservative estimate. All households are assumed to be at the top of their income ranges (when in reality they will be spread among them), further increasing the subsidy required. Over half of the subsidy is required for extremely low income households, about one‐third for low income households, and about 10 percent for low‐income households.

5 This Countywide housing price distribution was applied to all subregions. In reality, the housing price distribution will vary by subregion.

Table S-2Projected Housing Need versus Housing Supply by Subregion, 2005-2025San Mateo County Housing Needs Assessment; EPS #15099

Supply (2) Need Balance (3) Supply (2) Need Balance (3)

North County$0 - $30,550 0 4,940 (4,940) 0 4,940 (4,940)

$30,551 - $50,900 323 4,520 (4,197) 202 4,520 (4,318)$50,901 - $81,450 1,727 6,620 (4,893) 1,081 6,620 (5,539)$81,451 - $85,500 358 780 (422) 224 780 (556)$85,501 - $102,600 1,511 2,920 (1,409) 946 2,920 (1,974)

More than $102,600 8,781 10,520 (1,739) 5,497 10,520 (5,023)Subtotal 12,699 30,300 (17,601) 7,950 30,300 (22,350)

Mid County$0 - $30,550 0 3,960 (3,960) 0 3,960 (3,960)

$30,551 - $50,900 201 3,610 (3,409) 94 3,610 (3,516)$50,901 - $81,450 1,024 5,280 (4,256) 480 5,280 (4,800)$81,451 - $85,500 215 630 (415) 101 630 (529)$85,501 - $102,600 909 2,380 (1,471) 426 2,380 (1,954)

More than $102,600 9,681 8,840 841 4,537 8,840 (4,303)Subtotal 12,032 24,700 (12,668) 5,638 24,700 (19,062)

South County$0 - $30,550 238 2,760 (2,522) 100 2,760 (2,660)

$30,551 - $50,900 604 2,520 (1,916) 342 2,520 (2,178)$50,901 - $81,450 1,594 3,720 (2,126) 945 3,720 (2,775)$81,451 - $85,500 240 440 (200) 146 440 (294)$85,501 - $102,600 1,014 1,680 (666) 615 1,680 (1,065)

More than $102,600 7,772 6,240 1,532 5,187 6,240 (1,053)Subtotal 11,463 17,360 (5,897) 7,335 17,360 (10,025)

Coastal$0 - $30,550 0 85 (85) 0 85 (85)

$30,551 - $50,900 0 74 (74) 0 74 (74)$50,901 - $81,450 28 114 (86) 48 114 (66)$81,451 - $85,500 19 14 5 33 14 19$85,501 - $102,600 81 53 28 139 53 86

More than $102,600 1,577 195 1,382 2,707 195 2,512Subtotal 1,705 535 1,170 2,928 535 2,393

San Mateo County$0 - $30,550 238 11,745 (11,507) 100 11,745 (11,645)

$30,551 - $50,900 1,128 10,724 (9,596) 638 10,724 (10,086)$50,901 - $81,450 4,373 15,734 (11,361) 2,554 15,734 (13,180)$81,451 - $85,500 833 1,864 (1,031) 504 1,864 (1,360)$85,501 - $102,600 3,515 7,033 (3,518) 2,126 7,033 (4,907)

More than $102,600 27,811 25,795 2,016 17,929 25,795 (7,866)

San Mateo County Total 37,898 72,895 (34,997) 23,851 72,895 (49,044)

(1) Household income figures in 2005 dollars.

(3) Negative balance indicates a housing deficiency.

Source: Economic & Planning Systems, Inc.

Household Income (1)Scenario 1 Scenario 2

(2) Housing supply varies by scenario. Scenario 1 supply is based on ABAG household projections; Scenario 2 supply is based on historic housing production.

Economic & Planning Systems, Inc. 12/1/2006 P:\15000s\15099SanMateoHsng\Model\execsumtbls_112806.xls11

Figure S-6Subsidy Required by Income GroupSan Mateo County Housing Needs Assessment; EPS #15099

Subsidy Required by Income Group

58%32%

9% 1%

Total Subsidy for Extremely-Low Income Units Total Subsidy for Very-Low Income UnitsTotal Subsidy for Lower Income Units Total Subsidy for Moderate Income Units

$2.0 billion

$580 million$38 million

$3.5 billion


12


November 30, 2006


10. This housing deficiency will have some mix of the following negative consequences: further overcrowding and overpayment; increased commute times, commute costs, and air quality impacts; and limitations on job growth.

In 2000, significant levels of overcrowding and overpayment were recorded in San Mateo County. Without a significant increase in housing production, especially for households with incomes below moderate levels, these conditions will worsen. Increasing numbers of households will live at levels of more than one person per room and pay over 30 percent of their income on housing. The limited housing production itself will lead to housing price increases above the rate of inflation, further exacerbating the problem. Increasing numbers of households will seek housing further away in more affordable counties, including outside of the nine‐County San Francisco Bay Area. Employers who already report a lack of housing as a number one concern in Silicon Valley may choose to relocate and others may choose never to come to San Mateo County given the difficulties their employees will have finding housing. 11. San Mateo County and its cities need to explore a range of policy options to reduce the housing deficiency and the scale of associated negative impacts.

Available policy options for increasing housing supply include increasing planned housing capacity, encouraging the efficient use of available land, identifying appropriate opportunity sites where more housing can be built, and supporting efforts to build affordable housing, both financially and administratively. The full suite of policy and financing tools including inclusionary housing requirements, a commercial linkage fee, tax credits, Redevelopment Agency tax increment funding, and other State and federal funding and programs will be required to help address the affordable housing challenge. 12. A commercial linkage fee represents one potential policy tool. A commercial linkage fee that charges a fee on workspace development for the associated housing needs generated in San Mateo County is one tool that can help close the affordability gap. The planning‐level linkage fee estimates suggest a full impact linkage fee of between $35 and $75 per square foot depending on the workspace type. A fee at this level will be financially infeasible for new development. Similar to some other jurisdictions in California, a fee at a fraction of this level could provide an important source of affordable housing funding without significantly affecting the level of workspace development. At 10 percent, the fraction of the maximum fee applied in some other jurisdictions (e.g., Sonoma County), the affordable housing linkage fee would be between $3.50 and $7.50 per square foot depending on the workspace type. This fee level is below the fee in the City of Menlo Park that is currently at $12.54 per square foot for office and R&D development and $6.82 per square foot for retail and industrial development.


I. INTRODUCTION

PURPOSE OF REPORT

Economic & Planning Systems, Inc. (EPS) was retained to conduct a housing needs analysis for San Mateo County. The housing needs analysis compares projected housing need to housing supply to estimate the size of expected housing deficits between 2005 and 2025. This analysis represents an update to the 1998 San Mateo County Housing Needs Analysis also conducted by EPS. The overall purpose of the report is to determine whether future housing deficits are likely in San Mateo County, to consider how they might exacerbate existing housing issues, and to determine whether any such deficits would affect congestion and economic growth in the coming decades.

APPROACH AND METHODOLOGY

In order to analyze the link between future economic growth and housing supply between 2005 and 2025, this report estimates future housing need associated with County growth, future housing supply, and resulting housing deficits. Employment growth, as projected by ABAG, is used as a measure of economic growth, and links between affordable housing cost and household income are based on standard household expenditure assumptions. Total housing need estimates were based on estimates of new worker and non‐worker households. New worker households were projected using a housing needs model that estimates household formation patterns based on 2005 to 2025 employment projections and 2000 demographic relationships. New non‐worker household estimates were based on the 2000 demographic relationships between worker and non‐worker households by income level. Total new households were converted into total new housing unit need using a minimum vacancy rate assumption. Housing supply was estimated in two separate ways. Under the first approach, ABAG 2005 household projections were used to estimate housing supply. Under the second approach, housing supply projections were based on the historical rate of housing development between 1995 and 2005. The housing needs analysis is conducted at both the County level, but also at the subregion level. Figure S‐3 shows the breakdown of the County into four subregions: North County, Mid County, South County, and the Coastal area.6

6 The North County subregion consists of Brisbane, Colma, Daly City, Millbrae, Pacifica, San Bruno, and South San Francisco. The Mid‐County subregion consists of Belmont, Burlingame, Foster City, Hillsborough, San Carlos, and San Mateo. The South County subregion consists of Atherton, Menlo Park, Portola Valley, Redwood City, and Woodside. Finally, the Coastal area subregion includes Half Moon Bay and unincorporated areas in the western portion of the County.


November 30, 2006


ORGANIZATION OF REPORT

Chapter I outlines the purpose of the report, gives a brief overview of the approach and methodology used, and describes the organization of the report. Chapter II provides an overview of the current housing market in San Mateo County, assesses the availability of existing housing stock to meet future housing needs, and presents detailed information on new developments under construction and on the market. Chapter III describes the methodology used in estimating housing need, including the methodology of the EPS housing needs model, the estimation of non‐worker households, and the conversion of total new household estimates into a housing unit need by tenure and household income. Chapter IV presents the two distinct housing supply forecasts for 2005‐2025, one based on ABAG household projections, and the other based on historical construction trends from 1995 to 2005. Chapter V presents a comparison of projected housing needs with housing supply. Projected net housing deficits/surpluses for the 2005‐2025 period are estimated. Projected deficits/surpluses are presented by tenure and household income group. Chapter VI estimates the affordability gap between housing cost and affordable housing payment and calculates the potential affordable housing linkage fees that could be charged on new workspace development. Chapter VII explains the role this report can play on supporting Housing Element updates.


II. EXISTING HOUSING CONDITIONS

This chapter provides background information on the County’s existing housing stock, assesses the availability of the existing housing stock to meet future housing needs, and presents data on recent housing developments.

OVERVIEW OF HOUSING MARKET

As of 2005, there were a total of 266,800 housing units in San Mateo County (see Table 1). For descriptive and analytical purposes, the County was divided into four subregions. About 35 percent of these units are in the North County, another 34 percent of these units in the Mid County, 21 percent in the South County, and 10 percent in the Coastal area. About 175,800 of these units were single‐family units and 87,500 multifamily. These ratios were relatively consistent throughout the subregions with the exception of the Coastal area with about 85 percent of units single‐family. The cities of San Mateo, Daly City, and Redwood City provided the largest numbers of housing units. The cities of San Mateo, Burlingame, and East Palo Alto had the lowest proportion of single‐family units at between 51 and 56 percent. Woodside, Atherton, and Hillsborough all had close to 100 percent single‐family development.

FOR‐SALE MARKET

The median home price in San Mateo County in 2005 was $750,000, up from $640,000 the previous year, a 17.19 percent increase (see Table 2). Over 65 percent of households fall in moderate income or below households, making less than $102,500 (120 percent of median income). Even for households making $102,500, the affordable home price is below $600,000 (see Table 3). The median home price varies by subregion. The median home price in the South County subregion was the highest in 2005 at about $886,0007, followed by the Mid County subregion at $883,500, the Coastal area subregion at $790,000, and the North County subregion at $690,000.

RENTAL MARKET

RealFact’s fourth quarter 2005 survey identified 21,608 apartments in 115 properties with over 50 units. 8 Approximately 80 percent of these apartments were classified as Class C, 13 percent as Class A, and 8 percent as Class B. The average year built was 1972 and ranged from 1948 to 2005 (see Table 4). Approximately 82 percent of

7 Does not include City of East Palo Alto as data on median home price is not reported. 8 The most comprehensive apartment market data is only available for properties with at least 50 units. The properties surveyed by RealFacts in the fourth quarter of 2005 ranged from 50 to 2,983 units, with an average of 187 units.

Table 1San Mateo County Housing Units, 2005San Mateo County Housing Needs Assessment; EPS #15099

Area Units % of City Units % of City Units % of City Total Units

North CountyBrisbane 1,320 69% 537 28% 43 2% 1,900Colma 282 62% 168 37% 6 1% 456Daly City 20,611 65% 10,429 33% 642 2% 31,682Millbrae 5,588 69% 2,523 31% 11 0% 8,122Pacifica 11,144 78% 3,135 22% 98 1% 14,377San Bruno 9,693 61% 6,061 38% 22 0% 15,776South San Francisco 14,525 71% 5,610 27% 409 2% 20,544 Sub-Total/Average 63,163 68% 28,463 32% 1,231 2% 92,857

Mid CountyBelmont 6,899 64% 3,846 36% 0 0% 10,745Burlingame 6,579 51% 6,368 49% 0 0% 12,947Foster City 7,273 58% 5,198 42% 7 0% 12,478Hillsborough 3,857 100% 9 0% 0 0% 3,866San Mateo 21,217 54% 17,810 46% 45 0% 39,072San Carlos 8,865 74% 3,030 25% 16 0% 11,911 Sub-Total/Average 54,690 62% 36,261 43% 68 0% 91,019

South CountyRedwood City 17,208 59% 11,159 38% 833 3% 29,200Menlo Park 7,779 61% 4,940 39% 5 0% 12,724Atherton 2,525 100% 7 0% 0 0% 2,532Portola Valley 1,531 85% 275 15% 0 0% 1,806Woodside 2,054 98% 33 2% 1 0% 2,088East Palo Alto 4,322 56% 3,275 42% 159 2% 7,756 Sub-Total/Average 35,419 65% 19,689 39% 998 3% 56,106

CoastalHalf Moon Bay 3,318 75% 693 16% 427 10% 4,438Other (Unincorporated) 19,222 86% 2,353 10% 847 4% 22,422 Sub-Total/Average 22,540 84% 3,046 12% 1,274 6% 26,860

San Mateo County 175,812 66% 87,459 33% 3,571 1% 266,842

Sources: Department of Finance (DOF); Economic & Planning Systems, Inc.

Single-Family Multifamily Mobile Homes

Economic & Planning Systems, Inc. 11/29/2006 P:\15000s\15099SanMateoHsng\Model\15099HsngNeed_112906.xls

17

Table 2San Mateo County Home Sales Activity by City, 2004-2005San Mateo County Housing Needs Assessment; EPS #15099

City (1) # Sold % of Total 2004 2005 % Change

North County (2)Brisbane 90 1.1% $569,000 $673,500 18.37%Daly City 1,134 13.4% $568,500 $670,000 17.85%Millbrae 248 2.9% $779,000 $900,000 15.53%Pacifica 494 5.8% $599,000 $685,000 14.36%San Bruno 713 8.4% $532,500 $665,000 24.88%South San Francisco 691 8.2% $586,000 $685,000 16.89% Sub-Total/Average 3,370 39.9% $691,236

Mid County (3)Belmont 346 4.1% $780,000 $890,000 14.10%Burlingame 513 6.1% $1,200,000 $1,325,000 10.42%San Carlos 452 5.3% $760,000 $900,000 18.42%San Mateo 1,769 20.9% $650,000 $750,000 15.38% Sub-Total/Average 3,080 36.4% $883,511

South CountyAtherton 42 0.5% $2,280,000 $2,275,000 -0.22%Menlo Park 360 4.3% $750,000 $875,000 16.67%Portola Valley 31 0.4% $1,400,000 $1,565,000 11.79%Redwood City 857 10.1% $645,000 $735,000 13.95%Woodside 347 4.1% $880,000 $1,040,000 18.18% Sub-Total/Average 1,637 19.4% $885,669

CoastalHalf Moon Bay 222 2.6% $720,500 $806,500 11.94%Unincorporated El Granada 44 0.5% $697,000 $769,500 10.40% La Honda 18 0.2% $460,000 $602,500 30.98% Montara 36 0.4% $699,500 $776,500 11.01% Moss Beach 33 0.4% $689,000 $850,000 23.37% Pescadero 10 0.1% $708,500 $772,500 9.03% Sub-Total/Average 363 4.3% $791,942

Total 8,450 100% $640,000 $750,000 17.19%

(1) Data not available for East Palo Alto.(2) Data not available for Colma.(3) Data not available for Foster City and Hillsborough.

Sources: DataQuick; Economics & Planning Systems, Inc.

Sales Price2005

Economic & Planning Systems, Inc. 11/29/2006 P:\15000s\15099SanMateoHsng\Model\15099HsngNeed_112906.xls18

Table 3Estimated Link between Household Income and Affordable Housing CostsSan Mateo County Housing Needs Assessment; EPS #15099

Owners Renters Total % Total

$0 - $30,550 6,964 9,277 16,241 16% $0 - $174,537 $0 - $764$30,551 - $50,900 6,999 7,840 14,839 15% $174,543 - $290,800 $764 - $1,273$50,901 - $81,450 11,560 10,196 21,756 22% $290,806 - $465,338 $1,273 - $2,036$81,451 - $85,500 1,457 1,109 2,566 3% $465,343 - $488,476 $2,036 - $2,138$85,501 - $102,600 6,270 3,459 9,729 10% $488,482 - $586,171 $2,138 - $2,565

More than $102,600 27,374 8,287 35,661 35% $586,172 + $2,566 +

Total 60,625 40,167 100,792 100%

(1) Household income figures in 2005 dollars.(2) Distribution from 2000 U.S. Census.(3) Assumptions include a 20% of home price down payment, a 30 year loan with 6.5% interest charge, and annual housing expenditures no greater than 35% of household income.(4) Assumes that households spend 30% of monthly income on rent.


Household Income (1)Affordable

House Prices (3)Affordable

Rental Rages (4)Households (2)


19

Table 4San Mateo County Age of For-Rent Residential Inventory, 2005San Mateo County Housing Needs Assessment; EPS #15099

Number ofYear Built Age Properties (1) Distribution

Pre-1960s Over 45 7 6%1960s 35-45 39 34%1970s 25-35 48 42%1980s 15-25 9 8%1990s 5-15 4 3%2000s Less than 5 8 7% Total 115 100%

Average Year Built 1972Age Range 1948 - 2005

(1) Apartment projects with at least 50 units.

Sources: RealFacts (4Q05); Economic & Planning Systems, Inc.



November 30, 2006


the properties were built during the 1970s or earlier, while only seven percent have been built since 2000. The majority of units surveyed were 1‐bedrooms with 1 bath (43 percent), 2‐bedrooms with 2 baths (23 percent), and 2‐bedrooms with 1 bath (13 percent) (see Table 5). As of fourth quarter 2005, the vacancy rate was reported as 4.1 percent and the average monthly lease rate was $1,411 (see Table 6).9 It is estimated that about 65 percent of San Mateo County households could afford this average monthly rent (see Table 3). However, these apartments are too small or would require overcrowding to accommodate many of these households.

AVAILABILITY OF EXISTING HOUSING STOCK

At present, there are minimal vacancies in the San Mateo County housing market and clear indications of an undersupply of housing affordable to households making less than the median income. The average Countywide vacancy rate at 2.5 percent represents a structural vacancy associated with normal turnover. As a result, there is minimal excess capacity among the existing housing stock to accommodate new household formation. Current housing conditions also indicate a significant, undersupply of housing. The San Mateo County 2000 Housing Element indicated 31,000 units, 11.9 percent of the total, were overcrowded and that households in 63,000 units, 24.2 percent of the total, put more than 30 percent of their income towards housing costs.10

COMMUTING

As of 2000, San Mateo County in‐commuting and out‐commuting were significant, but relatively balanced. As a result, while many workers at San Mateo County jobs found housing elsewhere, a similar number of persons working in other counties resided in San Mateo County. As a result, at the current time, other counties do not absorb a significant net amount of worker housing need. As discussed in subsequent sections, projections suggest that this pattern will change, with in‐commuting starting to significantly outnumber out‐commuting in the coming years. As of 2000, about 59 percent of San Mateo County workers (206,100) lived in the County and about 41 percent (144,400) lived outside. The 144,400 in‐commuting workers primarily lived in San Francisco, Santa Clara, and Alameda counties. At the same time, about 58 percent of the employed residents of San Mateo County worked inside

9 The data is only cities with at least 5 communities of at least 50 units. 10 The number of housing units in San Mateo County in 2000 was 260,600. Overcrowding was defined as units with more than one person per room.

Table 5San Mateo County For-Rent Residential Unit Mix, 2005 (1)San Mateo County Housing Needs Assessment; EPS #15099

Unit Type Units (2) Distribution

Studio 2,163 10.0%Jr 1 bd 530 2.5%1 bd 1 bth 9,216 42.7%1 bd TH (3) 25 0.1%2 bd 1 bth 2,763 12.8%2 bd 1.5 bth 308 1.4%2 bd 2 bth 5,017 23.2%2 bd TH (3) 751 3.5%3 bd 1 bth 6 0.0%3 bd 1.5 bth 64 0.3%3 bd 2 bth 497 2.3%3 bd 3 bth 15 0.1%3 bd TH (3) 253 1.2% Total 21,608 100%

(2) Apartment projects with at least 50 units.


(1) Although this source only tracks one-quarter of apartment stocks, it is considered to be reasonably representative.

(3) TH = Townhome.


Table 6San Mateo County For-Rent Residential Summary by City, 2005San Mateo County Housing Needs Assessment; EPS #15099

Avg. Avg.City (1) Communities % of Total Occupancy Rent

San Mateo 29 28.7% 96.4% $1,515Redwood City 14 13.9% 95.9% $1,519Daly City 13 12.9% 94.3% $1,259Foster City 13 12.9% 95.9% $1,623Belmont 12 11.9% 96.2% $1,179Pacifica 9 8.9% 95.0% $1,435East Palo Alto 6 5.9% 97.4% $1,015South San Francisco 5 5.0% 96.5% $1,339 Total/Average 101 100% 95.9% $1,411

(1) Cities with at least 5 communities of at least 50 units.




November 30, 2006


the County and 42 percent worked outside. The 146,800 out‐commuting workers in 2000 primarily worked in San Francisco, Santa Clara, and Alameda counties. Overall, San Mateo County workers formed about 80,500 households in other Counties (an average of about 1.8 workers per household), while San Mateo County provided housing for about 76,200 households who worked elsewhere (an average of about 1.9 workers per household). This represents only a small net provision of housing by other counties for San Mateo County workers (se Tables 7 and 8).

NEW DEVELOPMENTS

Table 9 shows several of the new residential developments in San Mateo County. The price points of the new developments vary from about $500,000 up to $1.2 million. The price variation is primarily related to the size of the units and the product type. For example, single‐family detached units were larger and carried higher price points than the condominiums. At the same time, the combination of low interest rates, relatively low rental rates, and increasing constructions costs resulted in minimal apartment development in recent years. Overall, new development, whether the product is aimed at young professionals, empty nesters, or families, has targeted the higher end of the market.

Table 7San Mateo County Head of Household Residents Who Work Elsewhere by Industrial Sector and Occupation, 2000San Mateo County Housing Needs Assessment; EPS #15099

Industry Management ServiceSales and

Office

Farming, Fishing, &

ForestryConstruction &

Extraction

Installation, Maintenance, Repair, Production,

Transportation, Material Moving

Armed Forces Total

Agriculture, Forestry, Fishing, Hunting, Mining 45 24 50 0 19 16 0 154

Construction 1,593 19 209 0 3,766 388 0 5,975

Manufacturing and Wholesale 9,330 90 2,397 0 150 2,700 0 14,667

Retail 1,723 126 2,557 0 70 811 0 5,287

Transportation, Warehousing, and Utilities 918 208 1,750 0 104 2,311 0 5,291

Information 2,987 21 1,321 0 0 583 0 4,912

Finance, Insurance, Real Estate, Rental, and Leasing 3,738 154 2,432 0 45 333 0 6,702

Professional, Scientific, Management, Administrative, and Waste Management 9,902 1,024 2,003 0 145 387 0 13,461

Educational, Health, and Social Services 8,565 776 1,270 0 43 157 0 10,811

Arts, Entertainment, Accommodation, Food Services, Other Services (except Public Administration 1,922 2,367 564 0 13 972 0 5,838

Public Administration and Armed Forces 1,391 849 579 0 102 175 0 3,096

Total 42,114 5,658 15,132 0 4,457 8,833 0 76,194

Sources: Beyond 20/20; Economic and Planning Systems, Inc.


25

Table 8San Mateo County Head of Household Workers Who Live Elsewhere by Industrial Sector and Occupation, 2000San Mateo County Housing Needs Assessment; EPS #15099

Industry Management ServiceSales and

Office

Farming, Fishing, &

ForestryConstruction &

Extraction

Installation, Maintenance, Repair, Production,

Transportation, Material Moving

Armed Forces Total

Agriculture, Forestry, Fishing, Hunting, Mining 88 0 0 156 0 43 0 287

Construction 1,458 29 193 0 4,372 569 0 6,621

Manufacturing and Wholesale 8,250 60 2,505 13 192 3,927 0 14,947

Retail 3,132 157 3,129 0 76 1,030 0 7,524

Transportation, Warehousing, and Utilities 1,677 975 2,041 0 132 4,578 0 9,403

Information 4,242 40 1,362 0 0 235 0 5,879

Finance, Insurance, Real Estate, Rental, and Leasing 3,380 55 1,721 0 18 253 0 5,427

Professional, Scientific, Management, Administrative, and Waste Management 12,791 1,101 1,310 0 93 527 0 15,822

Educational, Health, and Social Services 4,993 706 653 0 33 157 0 6,542

Arts, Entertainment, Accommodation, Food Services, Other Services (except Public Administration 1,447 1,980 663 0 42 1,036 0 5,168

Public Administration and Armed Forces 1,336 997 344 0 59 125 69 2,930

Total 42,794 6,100 13,921 169 5,017 12,480 69 80,550



26

Table 9New Developments in San Mateo CountySan Mateo County Housing Needs Assessment; EPS #15099

Average Unit Average No. Total Units Units Units in AverageProject Name Builder City Unit Type Size (Sq. Ft.) of Bedrooms In Project Sold Pipeline Sales Price

Cambridge Summer Hill Belmont Townhome 1,611 2 52 52 n/a $722,713

Maple Lane Nexgen East Palo Alto Single-Family 2,220 4 29 12 17 $805,743

Marisol Summer Hill San Bruno Single-Family 2,386 4 115 115 n/a $873,957

Peninsula Mandalay DR Horton So. San Francisco Condominiums 1,326 2 112 112 n/a $736,966

Mandalay Pointe DR Horton So. San Francisco Townhome 2,498 4 70 70 n/a $1,118,517

Saratoga Park JPI San Mateo Condominiums 898 2 226 61 85 $498,053

Sources: The Ryness Company; Economic & Planning Systems, Inc.


27


III. HOUSING NEEDS ANALYSIS

This chapter estimates the housing need generated by projected County employment and population growth between 2005 and 2025. Housing need is measured in terms of number of units, divided by unit tenure (for sale or for rent) and by household income/affordable housing cost (sales price or monthly rent). Estimates of housing need are based on the new households generated by projected County job growth, specifically worker households (households with one or more workers). Non‐worker households, such as unemployed, retired, and student households, are estimated based on the current ratio between worker and non‐worker households. Each new household represents an additional occupied unit. Vacant units, over and above the units occupied by new households, will also be required to allow for typical turnover in the housing market. The methodology and results of the housing needs analysis are described below.

NEW WORKER HOUSEHOLDS

METHODOLOGY

New worker households generated by employment growth were estimated using a worker housing needs model.11 The number of new households in the County associated with future economic growth depends on County employment growth as well as the changes in the number of in‐commuters and out‐commuters. The primary steps in the worker households needs model are as follows:

• Employment growth for 2005 to 2025 was estimated based on the ABAG 2005 job projections. These projections are the most detailed projections available for cities and counties in the San Francisco Bay Area. The projections are based on past trends as well as assumptions concerning land use policies, housing availability, and commute patterns. Because the 2005 employment projections are based both on economic trends as well as assumptions about changes in land use policies, the job projections represent a relatively high estimate of future job growth in San Mateo County. Actual job growth will depend on the pace of the Bay Area economic recovery, the ability of the Bay Area’s driving industries to specialize in high‐value functions in light of the national and overseas competition, and the ability of the Bay Area to retain and continue to draw high‐skilled workers.

11 The worker housing needs model connects employment projections by industry and occupation to relationships between workers, household formation, household income, and tenure based on 2000 Census information.


November 30, 2006


• The ABAG employment projections by city and industry were broken out by subregions. In addition, the jobs by industry were broken out into jobs by industry and occupation based on the Countywide 2000 distribution of jobs in each industry by occupation.

• The household formation pattern of workers was based on Countywide 2000

Census information on the propensity of workers in different industry and occupational groups to be the head of household (i.e., primary earner in the household). The ratios were then applied to the job projection by industry and occupation to estimate the expected number of new households associated with the new jobs.

• As of 2000, the numbers of in‐commuters and out‐commuters were relatively

balanced (see Chapter II). As a result, the reduced need for new housing due to the provision of housing by other counties for San Mateo County workers was primarily negated by the provision of housing in San Mateo County for residents working in other counties. This is expected to change in the future, with the MTC projecting a significantly increased level of net in‐commuting into San Mateo County. Based on MTC’s projections, considering both new job growth in San Mateo County and elsewhere, other counties are expected to cover, in net terms, about 29.5 percent of San Mateo County’s job‐related housing needs. As a result, the new household formation projections were discounted by this percentage.

• The household income distribution associated with different heads of

households in different industry sectors was derived from 2000 Census data for the County. The detailed income distribution was adjusted from 1999 into 2005 dollar terms based on a Consumer Price Index measure of inflation. The household income distribution was derived for specific income levels that correspond to the County’s latest affordable housing‐associated income levels, including the income levels associated with the top end of the moderate, low, very low, and extremely low income categories, as well as the median income level.

• The distribution of new worker households by subregion and by income group

was translated into household distribution by housing cost based on the Department of Housing and Urban Development’s (HUD) definition of preferred ratios between household income and housing expenditure. Specifically, 30 percent of gross household income was assumed to represent the cut‐off point for affordable housing expenditures. This expenditure level was translated into an affordable monthly rent and housing price (based on standard assumptions concerning down payments, interest rates, and mortgage payments).

• The projected number of new worker households was translated into a housing

unit need by assuming a fractional vacancy rate of 2.5 percent.


November 30, 2006


• The overall housing unit need matrix by subregion and income/housing cost was

divided into ownership need and rental need. The tenure split was based on the Countywide 2000 distribution between ownership and rental units. Tenure distributions may change through time depending on changes in the housing market and the ability of households to afford ownership units, though the 2000 numbers represent a reasonable proxy.

• Housing need estimates were provided for the period 2005 to 2014 in addition to

2005 to 2025. The 2005 to 2014 projections were estimated as a simple proportion of the 2005 to 2025 projections based on the relative numbers of years. The shorter period was covered both because it represents the period covered by the RHND and because it allows for a shorter term focus for policy discussion.

RESULTS

ABAG 2005 projections estimate an increase of 133,300 jobs in San Mateo County between 2005 and 2025 (see Table 10). This represents a 40 percent increase over its current 336,500 job count, an average annual increase of 1.7 percent. With the exception of government and agriculture and natural resource jobs, job growth is expected across all industry sectors. The professional and managerial services sector is projected to experience the largest absolute growth of about 23,000 jobs, about 17.5 percent of total new job growth. For the period 2005 to 2014, the job growth projected is about 60,000 jobs. The 2005 to 2025 job growth is expected to result in the formation of 68,100 new worker households, with an average of about two workers per household (see Table 11). Given the expected increase in in‐commuters relative to out‐commuters, San Mateo County will be required to satisfy the housing need of 70.5 percent of these households, or 48,000 households. For the period 2005 to 2014, the equivalent number of households is 21,600. Household formation patterns were converted into housing need assuming a 2.5 percent structural vacancy rate, which reflects the 2005 County rate. A total of 49,100 new housing units will be required to accommodate the new worker households formed between 2005 and 2025 (see Table 12). About 20,400 housing units will be required for households associated with North County job growth, 16,700 units to house Mid County job growth, and 11,700 to house South County job growth, and about 360 units in the Coastal area (see Table 12). Accordingly, over 41 percent of the job‐driven housing need will emanate from North County job growth, 34 percent from Mid County growth, and 24 percent from South County growth. For the period 2005 to 2014, the equivalent housing need is 22,100 units.

Table 10San Mateo County Employment Projections by Industry, 2005-2014San Mateo County Housing Needs Assessment; EPS #15099

2005-2014Industry Jobs % Jobs % Jobs Jobs (1)

Agriculture and Natural Resources 1,880 1% 1,900 0% 20 9Construction 25,920 8% 37,680 8% 11,760 5,292Manufacturing and Wholesale 40,130 12% 57,700 12% 17,570 7,907Retail 35,160 10% 49,040 10% 13,880 6,246Transportation and Utilities 30,980 9% 41,810 9% 10,830 4,874Information 16,950 5% 26,000 6% 9,050 4,073Financial and Leasing 29,550 9% 43,490 9% 13,940 6,273Professional and Managerial Services 60,000 18% 83,130 18% 23,130 10,409Health and Educational Services 50,010 15% 67,420 14% 17,410 7,835Arts, Recreation and Other Services 35,870 11% 49,050 10% 13,180 5,931Government 10,010 3% 12,520 3% 2,510 1,130 Total 336,460 100% 469,740 100% 133,280 59,976

(1) Represents proportionate share of job growth 2005-2025. Specific projections for 2004-2014 are uncertain.

Sources: ABAG (2005); Economic and Planning Systems, Inc.

2005 2025 2005-2025


31

Table 11San Mateo County Worker Household Formation by Industry Sector and Occupation, 2005-2025San Mateo County Housing Needs Assessment; EPS #15099

Industry Management Service Sales & OfficeFarming, Fishing,

& ForestryConstruction &

ExtractionMaintenance, Production, &

Transportation (1)Armed Forces Number %

Agriculture, Forestry, Fishing, Hunting, Mining 3 0 0 4 0 2 0 9 0%

Construction 1,773 42 355 0 4,580 455 0 7,205 11%

Manufacturing and Wholesale 4,975 75 2,106 37 127 2,455 0 9,775 14%

Retail 2,052 116 3,110 0 42 735 0 6,054 9%

Transportation, Warehousing, and Utilities 1,189 514 1,682 0 92 2,791 0 6,267 9%

Information 3,513 26 971 0 0 259 0 4,769 7%

Finance, Insurance, Real Estate, Rental, and Leasing 4,098 72 2,758 0 65 261 0 7,255 11%

Professional, Scientific, Management, Administrative, and Waste Management 9,503 1,234 1,538 0 63 422 0 12,759 19%

Educational, Health, and Social Services 5,312 1,024 799 0 30 157 0 7,322 11%

Arts, Entertainment, Accommodation, Food Services, Other Services (except Public Administration 1,311 2,159 658 0 31 1,018 0 5,177 8%

Public Administration and Armed Forces 594 530 247 0 24 54 21 1,469 2%

Total 34,323 5,792 14,224 40 5,053 8,608 21 68,062 100%

Job Related Worker Household Formation in San Mateo County (2) 24,217 4,086 10,036 28 3,565 6,073 15 48,021

(1) Installation, Maintenance, Repair, Production, Transportation, and Material Moving.(2) Numbers are decreased by 29.5% to account for the net provision of housing by other counties.


San Mateo County


32

Table 12San Mateo County Income Distribution of Worker Housing Units, 2005-2025San Mateo County Housing Needs Assessment; EPS #15099

North County Mid County South County Coastal San Mateo County

$0 - $30,550 1,602 1,284 895 28 3,808$30,551 - $50,900 2,667 2,131 1,490 44 6,331$50,901 - $81,450 4,565 3,641 2,563 78 10,847$81,451 - $85,500 593 480 337 11 1,420$85,501 - $102,600 2,201 1,792 1,268 40 5,302

More than $102,600 8,728 7,331 5,176 162 21,396

Total 20,355 16,658 11,729 362 49,104

(1) The income categories were inflated by 12.4% to reflect the growth rate of the San Mateo HUD Income Limits from 2000 to 2005, which also closely reflects the growth in CPI for that period.(2) Accounts for San Mateo County Housing Needs Assessment; EPS #15099 structural vacancy rate.

Sources: HUD; ABAG (2005); Economic & Planning Systems, Inc.

Housing Units (2)Household Income (1)


33


November 30, 2006


Over 40 percent of the job‐driven housing need (about 21,000 units) will come from households making less than $81,450, 95 percent of median income, defined as low, very low, and extremely low income households. 12 More specifically, between 2005 and 2025, about 3,800 new housing units will be required to accommodate extremely low income worker households, 6,300 units to accommodate very low income households, and 10,800 units to accommodate low income households. An additional 6,700 housing units will be required to accommodate moderate income households (household with incomes below 120 percent of median income but above the low income level) and 21,400 units to accommodate households making above moderate income (see Table 12). About 8,800 units will be required to serve new low, very low, and extremely low income worker households associated with new North County jobs, 7,100 units in the Mid County, 4,900 housing units in the South County, and 150 units in the Coastal area (see Table 12). Based on the 2000 tenure patterns, approximately 63 percent of the need for housing in San Mateo County will be for ownership units and 37 percent for rental units (see Table 13). The Coastal area is expected to have the highest proportionate need for ownership units at 76 percent, followed by the North County at 67 percent, and the Mid and South County subregions at 60 percent. As household income increases, the opportunity for home ownership typically increases. As a result, the propensity to own is significantly higher at the higher income levels. For example, current and expected future home ownership is estimated at 43 percent for households with incomes less than $30,550 and at 77 percent for households with incomes greater than $102,600 based on Census 2000 data. Table 14 shows how much projected new worker households could afford to spend on housing by tenure.

TOTAL HOUSING NEED

The actual housing need in San Mateo County will be significantly greater than the worker driven housing need. Housing need is composed of worker households as well as non‐worker households, including traditional retirees, persons living off investments, students, and unemployed households among others. In the year 2000, the County consisted of a total of 254,200 households, including 172,800 worker households and 81,400 non‐worker households (see Table 15). On average, the countywide ratio of non‐worker to worker households was 0.47 in 2000. However, ratios vary significantly

12 San Mateo County 2005 definitions include: (1) extremely low income households make 35 percent of Countywide median income; (2) very low income households make 60 percent of median income; (3) low income households make 95 percent of median income; (3) moderate income households make less than 120 percent of median income. The County median income used for the purposes of this analysis is $85,500 (2005 dollars) and represents the existing median for a 3‐person household.

Table 13San Mateo County Income Distribution of Worker Housing Units by Tenure, 2005-2025San Mateo County Housing Needs Assessment; EPS #15099

Units % Units % Units % Units % Units %

Owner

$0 - $30,550 734 46% 550 43% 331 37% 19 68% 1,634 43%$30,551 - $50,900 1,383 52% 981 46% 593 40% 29 66% 2,986 47%$50,901 - $81,450 2,653 58% 1,820 50% 1,238 48% 58 74% 5,769 53%$81,451 - $85,500 374 63% 247 52% 171 51% 8 73% 799 57%$85,501 - $102,600 1,609 73% 1,058 59% 722 57% 28 70% 3,418 64%

More than $102,600 6,907 79% 5,405 74% 3,976 77% 135 84% 16,424 77%

Total 13,659 67% 10,061 60% 7,032 60% 277 76% 31,029 63%

Renter

$0 - $30,550 868 54% 734 57% 566 63% 9 33% 2,177 57%$30,551 - $50,900 1,284 48% 1,150 54% 896 60% 15 34% 3,345 53%$50,901 - $81,450 1,912 42% 1,827 50% 1,328 52% 20 26% 5,088 47%$81,451 - $85,500 219 37% 226 48% 161 49% 3 27% 608 43%$85,501 - $102,600 593 27% 734 41% 547 43% 12 30% 1,885 36%

More than $102,600 1,820 21% 1,926 26% 1,199 23% 26 16% 4,972 23%

Total 6,696 33% 6,597 40% 4,697 40% 85 24% 18,075 37%

Total Units

$0 - $30,550 1,602 100% 1,284 100% 897 100% 28 100% 3,811 100%$30,551 - $50,900 2,667 100% 2,131 100% 1,489 100% 44 100% 6,331 100%$50,901 - $81,450 4,565 100% 3,648 100% 2,565 100% 78 100% 10,856 100%$81,451 - $85,500 593 100% 473 100% 332 100% 11 100% 1,408 100%$85,501 - $102,600 2,201 100% 1,792 100% 1,269 100% 40 100% 5,303 100%

More than $102,600 8,728 100% 7,331 100% 5,176 100% 162 100% 21,396 100%

Total 20,355 100% 16,658 100% 11,728 100% 363 100% 49,104 100%

(1) The income categories were inflated by 12.4% to reflect the growth rate of the HUD San Mateo Income Limit from 2000 to 2005, which also closely reflects the growth in CPI for that period.


San Mateo CountyHousehold Income (1)



35

Table 14San Mateo County Affordability Distribution of Worker Housing Units by Tenure, 2005-2025San Mateo County Housing Needs Assessment; EPS #15099

Units % Units % Units % Units % Units %

Owner (1)

$0 - $174,537 734 4% 550 3% 331 3% 19 5% 1,634 3%$174,543 - $290,800 1,383 7% 981 6% 593 5% 29 8% 2,986 6%$290,806 - $465,338 2,653 13% 1,820 11% 1,238 11% 58 16% 5,769 12%$465,343 - $488,476 374 2% 247 1% 171 1% 8 2% 799 2%$488,482 - $586,171 1,609 8% 1,058 6% 722 6% 28 8% 3,418 7%

More than $586,172 6,907 34% 5,405 32% 3,976 34% 135 37% 16,424 33%

Total 13,659 67% 10,061 60% 7,032 60% 277 76% 31,029 63%

Renter (2)

$0 - $764 868 4% 734 4% 566 5% 9 3% 2,177 4%$764 - $1,273 1,284 6% 1,150 7% 896 8% 15 4% 3,345 7%

$1,273 - $2,036 1,912 9% 1,827 11% 1,328 11% 20 6% 5,088 10%$2,036 - $2,138 219 1% 226 1% 161 1% 3 1% 608 1%$2,138 - $2,565 593 3% 734 4% 547 5% 12 3% 1,885 4%

More than $2,566 1,820 9% 1,926 12% 1,199 10% 26 7% 4,972 10%

Total 6,696 33% 6,597 40% 4,697 40% 85 24% 18,075 37%

(1) Assumptions include a 20% of home price down payment, a 30 year loan with 6.5% interest charge, and annual housing expenditures no greater than 35% of household income.(2) Assumes that households spend 30% of monthly income on rent.

Sources: HUD; U.S. Census (2000); Economic & Planning Systems, Inc.

Coastal San Mateo CountyHousing Affordability

North County Mid County South County


36

Table 15San Mateo County Income Distribution of Worker and Non-Worker Households, 2000San Mateo County Housing Needs Assessment; EPS #15099

Household Income (1) Households Worker Households Non-Worker HouseholdsNon-Worker to Worker

Household Ratio

$0 - $30,550 38,602 12,516 26,086 2.08$30,551 - $50,900 36,716 21,671 15,046 0.69$50,901 - $81,450 54,199 37,361 16,838 0.45$81,451 - $85,500 6,603 5,034 1,570 0.31$85,501 - $102,600 22,922 17,272 5,649 0.33

More than $102,600 95,176 78,928 16,248 0.21

Total 254,219 172,782 81,437 0.47

(1) The income breakdown has been inflated by 12.4%, the growth rate of the San Mateo Income Limit between 2000 and 2005, which also closely reflects the growth in CPI for the period.

Sources: HUD; U.S. Census (2000); Economic & Planning Systems, Inc.


37


November 30, 2006


by income groups with non‐worker households representing a much higher proportion of households at lower income levels. This is the result of the more limited incomes of many traditional retirees, students, and unemployed persons. Total housing need depends on the number of new households formed. Total new households formed over the period equals new worker households plus new non‐worker households. As the population and number of households increase over time in the County, and especially as increasing numbers of workers from the baby boom generation retire, the number of non‐worker households in the County will increase. Estimates of new non‐worker households were based on the estimate of new worker households and existing ratios between non‐worker and worker households by income group, derived from 2000 Census data. If the current ratio of worker to non‐worker households continues, an additional 23,800 housing units would be required from 2005 to 2025 in addition to the 49,100 worker‐related housing units, for a total housing need of 72,900 housing units (see Table 16). This represents a significant increase in non‐worker households, though the expected increase in worker retirements supports this level of non‐worker households. The total number of persons in the County over 65 is expected to increase by about 65,000 persons over the next 20 years according to California Department of Finance (DOF) projections. Retirees will account for a significant proportion of the new non‐worker households.

Table 16San Mateo County Income Distribution of Worker and Non-Worker Housing Units Need by Tenure, 2005-2025San Mateo County Housing Needs Assessment; EPS #15099


Owner

$0 - $30,550 2,263 1,697 1,018 57 5,036$30,551 - $50,900 2,344 1,662 1,004 49 5,058$50,901 - $81,450 3,847 2,635 1,795 84 8,361$81,451 - $85,500 492 329 227 10 1,058$85,501 - $102,600 2,134 1,406 956 37 4,533

More than $102,600 8,326 6,517 4,794 163 19,801

Total 19,406 14,245 9,794 401 43,847

Renter

$0 - $30,550 2,677 2,263 1,742 28 6,709$30,551 - $50,900 2,176 1,948 1,516 25 5,666$50,901 - $81,450 2,773 2,645 1,925 30 7,373$81,451 - $85,500 288 301 213 4 806$85,501 - $102,600 786 974 724 16 2,500

More than $102,600 2,194 2,323 1,446 32 5,994

Total 10,894 10,455 7,566 134 29,048

Total Units

$0 - $30,550 4,940 3,960 2,760 85 11,745$30,551 - $50,900 4,520 3,610 2,520 74 10,724$50,901 - $81,450 6,620 5,280 3,720 114 15,734$81,451 - $85,500 780 630 440 14 1,864$85,501 - $102,600 2,920 2,380 1,680 53 7,033

More than $102,600 10,520 8,840 6,240 195 25,795

Total 30,300 24,700 17,360 535 72,895

(1) The income breakdown has been inflated by 12.4%, the growth rate of the San Mateo Income Limit between 2000 and 2005, which also closely reflects the growth in CPI for the period.


Household Income (1)


39


IV. HOUSING SUPPLY ANALYSIS

This chapter provides two distinct housing forecasts for 2005 to 2025 (and for 2005 to 2014). The first is based on the 2005 ABAG household projections and represents a more optimistic forecast based both on past housing development trends and conversations with local planners in other jurisdictions. It includes assumptions about the shift of regional housing supply to existing urbanized areas through shifts in land use and transportation policy. The second assumes a continuation of the historical, lower rate of housing development in the County over the last decade. The actual level of housing development will depend on local land use policies, market conditions, construction costs, and community support/opposition. An evaluation of General Plan land use policies in all cities in the County was beyond the scope of this analysis.

GENERAL APPROACH

The approach to estimating the number of new housing units projected to be developed between 2005 and 20025 and the associated results are described in the subsections below. For both scenarios, the division of housing supply between different household income groups/affordable housing costs was based on MTC Travel Model Systems. This model allocates future ABAG household growth by income group, thereby providing a proxy for the projected cost of housing. Converting the income categories in this model into the housing needs model income categories results in estimates that about 74 percent of new housing development between 2005 and 2025 will be affordable to households making more than moderate income, about 11.5 percent will be affordable to those making moderate incomes, and 14.5 percent affordable to those in the low income or below categories (see Table 17).13 The housing supply was also divided by tenure based on the 2000 tenure distributions by subregion and income category.

HOUSING SUPPLY SCENARIO 1

ABAG’s 2005 projections provide an estimate of new households between 2005 and 2025 by Bay Area county and city. Starting in 2003, ABAG projections were predicated on an increasing regional and local land use and transportation policy commitment to infill and transit‐oriented development throughout the San Francisco Bay Area. These household projections provide a more optimistic projection of future housing development in the County. ABAG projects that the new number of households in San Mateo County will increase by close to 37,000 between 2005 and 2025, or 0.71 percent annually. As shown in Table 18, when a structural vacancy rate of 2.5 percent is incorporated, these ABAG

13 This Countywide housing price distribution was applied to all subareas. In reality, the housing price distribution will vary by subarea.

Table 17Proportion of Housing Supply Affordable to Different Income GroupsSan Mateo County Housing Needs Assessment; EPS #15099


$0 - $30,550 0.0% 0.0% 2.1% 0.0% 0.0%$30,551 - $50,900 2.5% 1.7% 5.3% 0.0% 3.0%$50,901 - $81,450 13.6% 8.5% 13.9% 1.6% 11.7%$81,451 - $85,500 2.8% 1.8% 2.1% 1.1% 2.2%$85,501 - $102,600 11.9% 7.6% 8.8% 4.8% 9.4%

More than $102,600 69.1% 80.5% 67.8% 92.5% 73.7%

Total (2) 100% 100% 100% 100% 100%

(1) Converted to 2005 $$ from 1998 $$. Income distribution based on MTC household projections by income category for 2005-2025.

Sources: MTC; Economic & Planning Systems, Inc.



41

Table 18Scenario 1: San Mateo County Housing Projection, 2005-2025San Mateo County Housing Needs Assessment; EPS #15099


Total Units$0 - $30,550 0 0 238 0 238

$30,551 - $50,900 323 201 604 0 1,128$50,901 - $81,450 1,727 1,024 1,594 28 4,373$81,451 - $85,500 358 215 240 19 833$85,501 - $102,600 1,511 909 1,014 81 3,515

More than $102,600 8,781 9,681 7,772 1,577 27,811

Total (2) 12,699 12,032 11,463 1,705 37,898

Owner

$0 - $30,550 0 0 88 0 88$30,551 - $50,900 167 93 241 0 501$50,901 - $81,450 1,004 511 769 21 2,304$81,451 - $85,500 226 112 124 14 476$85,501 - $102,600 1,104 537 577 57 2,275

More than $102,600 6,949 7,138 5,971 1,322 21,380

Total (3) 9,450 8,391 7,770 1,414 27,024

Renter

$0 - $30,550 0 0 150 0 150$30,551 - $50,900 155 109 364 0 628$50,901 - $81,450 723 513 825 7 2,069$81,451 - $85,500 132 103 116 5 357$85,501 - $102,600 407 372 437 24 1,240

More than $102,600 1,831 2,544 1,801 255 6,431

Total (3) 3,249 3,641 3,693 291 10,874

(1) Income distribution based on MTC household projections by income category for 2005-2025.(2) Housing unit growth projected by applying 2005 San Mateo County vacancy rate of 2.48% from DOF to projected household growth (ABAG).(3) Applies 2000 tenure distribution from Census to total estimated units. See Table 13.

Sources: ABAG (2005); MTC; Economic & Planning Systems, Inc.




November 30, 2006


projections suggest a housing supply of 37,900 housing units. This includes 12,700 units in North County, 12,000 in Mid County, and 11,500 units in South County. In addition, a total of 1,700 units are projected in the Coastal area. Based on the MTC model, the large majority of the units, about 73 percent, will only be affordable to households with incomes over $102,600 (120 percent of median household income). Based on the existing tenure split, 27,000 of the units (71 percent) will be for sale, while the other 10,900 units (29 percent) will be for rent. Of the total, 21,400 units are expected to be for‐sale units aimed at household with incomes over 120 percent of the median. Another 6,400 units will be rental units aimed at this same income group. The remaining 10,100 units will be affordable to households making below 120 percent of median income, with about 1,350 units affordable to households making less than 60 percent of the median income. Of these 10,100 units, about 5,600 units are expected to be ownership units and 4,400 rental units.

HOUSING SUPPLY SCENARIO 2

The second projection of housing supply is based on the historical rate of housing development in the County. Specifically, the rate of housing development between 1995 and 2005 was estimated at 0.4 percent annually, based on California Department of Finance estimates, and was assumed to continue between 2005 and 2025. This approach results in a more conservative estimate of future housing development (see Table 19). This supply scenario projects the development of about 23,900 housing units between 2005 and 2025. This includes about 8,000 units in North County, 5,600 units in Mid County, 7,300 units in South County, and 2,900 units in the Coastal area. The only subregion with a higher supply projection than under Scenario 1 is the Coastal area. Similar to Scenario 1, the large majority of the units, about 75 percent, will only be affordable to households with incomes over $102,600. Overall, 17,300 of the units (73 percent) will be for sale, while the other 6,500 units (27 percent) will be for rent. Of the total, 13,900 units are expected to be for‐sale units aimed at household with incomes over 120 percent of the median. Another 4,000 units will be rental units aimed at this same income group. The remaining 5,900 units will be affordable to households making below 120 percent of median income, with about 750 units affordable to households making less than 60 percent of the median income. Of these 5,900 units, about 3,400 units are expected to be ownership units and 2,500 rental units.

Table 19Scenario 2: San Mateo County Housing Projection, 2005-2025San Mateo County Housing Needs Assessment; EPS #15099


Total Units$0 - $30,550 0 0 100 0 100

$30,551 - $50,900 202 94 342 0 638$50,901 - $81,450 1,081 480 945 48 2,554$81,451 - $85,500 224 101 146 33 504$85,501 - $102,600 946 426 615 139 2,126

More than $102,600 5,497 4,537 5,187 2,707 17,929Total (2) 7,950 5,638 7,335 2,928 23,851

Owner

$0 - $30,550 0 0 37 0 37$30,551 - $50,900 105 43 136 0 284$50,901 - $81,450 628 240 456 36 1,359$81,451 - $85,500 141 53 75 24 293$85,501 - $102,600 691 252 350 98 1,391

More than $102,600 4,351 3,345 3,985 2,270 13,950

Total (3) 5,916 3,932 5,039 2,427 17,315

Renter

$0 - $30,550 0 0 63 0 63$30,551 - $50,900 97 51 206 0 354$50,901 - $81,450 453 240 489 13 1,195$81,451 - $85,500 83 48 71 9 210$85,501 - $102,600 255 174 265 42 736

More than $102,600 1,147 1,192 1,202 437 3,978

Total (3) 2,034 1,706 2,296 500 6,536

(1) Income distribution based on MTC household projections by income category for 2005-2025.(2) Calculated by applying historical housing unit annual growth rate (DOF) to 2005 housing units estimates (DOF).(3) Applies 2000 tenure distribution from Census to total estimated units. See Table 13.

Sources: DOF; MTC; Economic & Planning Systems, Inc.




V. PROJECTED HOUSING DEFICITS/SURPLUSES

The comparison of projected housing need with housing supply suggests a significant deficiency in housing provision at all income levels, but most prevalently at the lower income levels. The sections below show this comparison and the associated housing deficits.

WORKER HOUSING NEED COMPARISON

OVERALL DEFICITS

The comparison of worker housing need to both housing supply projections indicates a significant shortfall in housing production, before non‐worker housing need is incorporated. As shown in Table 20, a total housing deficit of 11,200 units is projected under the more optimistic supply scenario (Scenario 1) between 2005 and 2025 and 5,000 units for the period 2005 to 2014 (see Table 21). Under this projection, housing supply would meet 77 percent of the worker housing need. Between 2005 and 2025, all of the 21,400 housing need of worker households with greater than moderate incomes will be accommodated with around 27,800 units. At all other levels, however, housing supply will significantly fall short of covering the worker housing need. For households with moderate income levels, between $81,500 and $102,500, the housing deficit will be about 2,300 units. For low‐, very low‐, and extremely low‐income households, a supply of only 5,700 units is projected relative to a projected need of 21,000 units. The resulting deficit is 15,300 for these income levels, representing an average additional deficit of over units each year. On a subregion basis, the North, Mid, and South County all show significant housing deficits (see Table 22). Similarly to the overall County pattern, the housing deficits in each of these subregions are most prevalent at the extremely low, very low, and low household income level. Overall, the North County’s supply is expected to be the lowest as a proportion of need at 62 percent, compared to 72 percent in the Mid County, and 97 percent in the South County. Because of its low level of job growth, the Coastal area has a projected supply that is greater than the projected need, though there are still housing deficits at the lowest income levels. If current housing construction trends continue (Scenario 2), the housing deficit will be even greater as shown in Table 20 and housing supply will cover less than 49 percent of the projected need. A total housing deficit of 25,253 units would occur over the 2005 to 2025 period and a deficit of 11,400 units over the 2005 to 2014 period (see Table 21). The overall housing deficit would be significant at all levels, including the higher income levels. A total deficit of 17,705 units would occur for low, very low, and extremely low income households over the twenty year period and 8,000 units over the nine‐year period.

Table 20Projected Housing Supply versus Worker Household Need, 2005-2025San Mateo County Housing Needs Assessment; EPS #15099

Supply Need (2) Balance (3) Supply Need (2) Balance (3) Supply Need (2) Balance (3)

Scenario 1 (4)$0 - $30,550 88 1,634 (1,546) 150 2,177 (2,026) 238 3,811 (3,572)

$30,551 - $50,900 501 2,986 (2,485) 628 3,345 (2,717) 1,128 6,331 (5,203)$50,901 - $81,450 2,304 5,769 (3,464) 2,069 5,088 (3,019) 4,373 10,856 (6,483)$81,451 - $85,500 476 799 (323) 357 608 (252) 833 1,408 (575)$85,501 - $102,600 2,275 3,418 (1,143) 1,240 1,885 (645) 3,515 5,303 (1,788)

More than $102,600 21,380 16,424 4,956 6,431 4,972 1,459 27,811 21,396 6,415Total 27,024 31,029 (4,005) 10,874 18,075 (7,200) 37,898 49,104 (11,206)

Scenario 2 (5)$0 - $30,550 37 1,634 (1,597) 63 2,177 (2,113) 100 3,811 (3,710)

$30,551 - $50,900 284 2,986 (2,702) 354 3,345 (2,991) 638 6,331 (5,693)$50,901 - $81,450 1,359 5,769 (4,409) 1,195 5,088 (3,893) 2,554 10,856 (8,302)$81,451 - $85,500 293 799 (506) 210 608 (398) 504 1,408 (904)$85,501 - $102,600 1,391 3,418 (2,027) 736 1,885 (1,150) 2,126 5,303 (3,176)

More than $102,600 13,950 16,424 (2,473) 3,978 4,972 (994) 17,929 21,396 (3,467)Total 17,315 31,029 (13,714) 6,536 18,075 (11,539) 23,851 49,104 (25,253)

(1) Household income figures in 2005 dollars.(2) See Table 13.(3) Negative balance indicates excess need.(4) See Table 18.(5) See Table 19.


Household Income (1)Ownership Units Rental Units Total Units


46



Scenario 1 (4)$0 - $30,550 40 735 (696) 68 979 (912) 107 1,715 (1,608)

$30,551 - $50,900 225 1,344 (1,118) 282 1,505 (1,223) 508 2,849 (2,341)$50,901 - $81,450 1,037 2,596 (1,559) 931 2,289 (1,359) 1,968 4,885 (2,918)$81,451 - $85,500 214 360 (146) 160 274 (113) 375 633 (259)$85,501 - $102,600 1,024 1,538 (514) 558 848 (290) 1,582 2,386 (805)

More than $102,600 9,621 7,391 2,230 2,894 2,237 657 12,515 9,628 2,887

Total 12,161 13,963 (1,802) 4,893 8,134 (3,240) 17,054 22,097 (5,043)

Scenario 2 (5)$0 - $30,550 17 735 (719) 28 979 (951) 45 1,715 (1,670)

$30,551 - $50,900 128 1,344 (1,216) 159 1,505 (1,346) 287 2,849 (2,562)$50,901 - $81,450 612 2,596 (1,984) 538 2,289 (1,752) 1,149 4,885 (3,736)$81,451 - $85,500 132 360 (228) 95 274 (179) 227 633 (407)$85,501 - $102,600 626 1,538 (912) 331 848 (517) 957 2,386 (1,429)

More than $102,600 6,278 7,391 (1,113) 1,790 2,237 (447) 8,068 9,628 (1,560)

Total 7,792 13,963 (6,171) 2,941 8,134 (5,192) 10,733 22,097 (11,364)



Ownership Units Rental Units Total UnitsHousehold Income (1)


47



Scenario 1 (4)$0 - $30,550 0 1,602 (1,602) 0 1,284 (1,284) 238 897 (658)

$30,551 - $50,900 323 2,667 (2,344) 201 2,131 (1,929) 604 1,489 (885)$50,901 - $81,450 1,727 4,565 (2,838) 1,024 3,648 (2,623) 1,594 2,565 (972)$81,451 - $85,500 358 593 (235) 215 473 (257) 240 332 (91)$85,501 - $102,600 1,511 2,201 (691) 909 1,792 (883) 1,014 1,269 (255)

More than $102,600 8,781 8,728 53 9,681 7,331 2,351 7,772 5,176 2,596

Total 12,699 20,355 (7,656) 12,032 16,658 (4,626) 11,463 11,728 (266)

Scenario 2 (5)$0 - $30,550 0 1,602 (1,602) 0 1,284 (1,284) 100 897 (797)

$30,551 - $50,900 202 2,667 (2,465) 94 2,131 (2,036) 342 1,489 (1,148)$50,901 - $81,450 1,081 4,565 (3,484) 480 3,648 (3,168) 945 2,565 (1,620)$81,451 - $85,500 224 593 (369) 101 473 (372) 146 332 (186)$85,501 - $102,600 946 2,201 (1,256) 426 1,792 (1,366) 615 1,269 (654)

More than $102,600 5,497 8,728 (3,230) 4,537 7,331 (2,794) 5,187 5,176 11

Total 7,950 20,355 (12,405) 5,638 16,658 (11,020) 7,335 11,728 (4,393)



Household Income (1)North County Mid County South County


48

Table 22 (continued)Projected Housing Supply versus Worker Household Need, 2005-2025San Mateo County Housing Needs Assessment; EPS #15099

Supply Need (2) Balance (3) Supply Need (2) Balance (3)

Scenario 1 (4)$0 - $30,550 0 28 (28) 238 3,811 (3,572)

$30,551 - $50,900 0 44 (44) 1,128 6,331 (5,203)$50,901 - $81,450 28 78 (50) 4,373 10,856 (6,483)$81,451 - $85,500 19 11 9 833 1,408 (575)$85,501 - $102,600 81 40 41 3,515 5,303 (1,788)

More than $102,600 1,577 162 1,415 27,811 21,396 6,415

Total 1,705 363 1,343 37,898 49,104 (11,206)

Scenario 2 (5)$0 - $30,550 0 28 (28) 100 3,811 (3,710)

$30,551 - $50,900 0 44 (44) 638 6,331 (5,693)$50,901 - $81,450 48 78 (30) 2,554 10,856 (8,302)$81,451 - $85,500 33 11 22 504 1,408 (904)$85,501 - $102,600 139 40 99 2,126 5,303 (3,176)

More than $102,600 2,707 162 2,546 17,929 21,396 (3,467)

Total 2,928 363 2,565 23,851 49,104 (25,253)



Costal San Mateo CountyHousehold Income (1)


49


November 30, 2006


DEFICITS BY TENURE

The projected housing need for ownership units between 2005 and 2025 is about 31,000 units (see Table 23). Under Scenario 1, a supply of 27,000 units is expected, resulting in a deficit of 4,000 ownership units. Under Scenario 2, a supply of 17,000 units is expected, resulting in a deficit of about 13,700 ownership units. For the period 2005 to 2014, a 1,800‐unit ownership deficit is projected under Scenario 1 and a 6,200‐unit deficit under Scenario 2. The projected housing need for rental units between 2005 and 2025 is 18,075 units (see Table 24). Under Scenario 1, a supply of 10,900 units is expected, resulting in a deficit of 7,200 rental units. Under Scenario 2, a supply of 6,500 units is expected, resulting in a deficit of about 11,500 rental units. For the period 2005 to 2014, a 3,200‐unit rental deficit is projected under Scenario 1 and a 5,200‐unit deficit under Scenario 2.

TOTAL HOUSING NEED

When the need of non‐worker households is included, housing need increases to 72,900 units (see Table 25). With the supply projections unchanged, the overall housing deficits are significantly increased, as described below:

• 2005‐2025: Supply Scenario 1. The housing supply will only cover 52 percent of total housing need. The overall housing deficit over the 2005 to 2025 period will be about 35,000, with a deficit of close to 32,500 units at the low, very low, and extremely low household income levels (see Table 25).

• 2005‐2014: Supply Scenario 1. The housing supply will only cover 52 percent of

total housing need. The overall housing deficit over the nine‐year period will be about 15,700, with a deficit of close to 14,600 units at the low, very low, and extremely low household income levels (see Table 26).


total housing need. The overall housing deficit over the 2005 to 2025 period will be about 49,000, with a deficit of close to about 34,900units at the low, very low, and extremely low household income levels (see Table 25).


total housing need. The overall housing deficit over the 9 year period will be about 22,100, with a deficit of close to 15,700 units at the low, very low, and extremely low household income levels (see Table 26).

Table 23Projected Housing Supply versus Worker Household Need for Ownership Units, 2005-2025San Mateo County Housing Needs Assessment; EPS #15099


Scenario 1 (4)$0 - $30,550 0 734 (734) 0 550 (550) 88 331 (243)

$30,551 - $50,900 167 1,383 (1,216) 93 981 (888) 241 593 (353)$50,901 - $81,450 1,004 2,653 (1,649) 511 1,820 (1,309) 769 1,238 (469)$81,451 - $85,500 226 374 (148) 112 247 (134) 124 171 (47)$85,501 - $102,600 1,104 1,609 (505) 537 1,058 (521) 577 722 (145)

More than $102,600 6,949 6,907 42 7,138 5,405 1,733 5,971 3,976 1,995

Total 9,450 13,659 (4,210) 8,391 10,061 (1,670) 7,770 7,032 738

Scenario 2 (5)$0 - $30,550 0 734 (734) 0 550 (550) 37 331 (294)

$30,551 - $50,900 105 1,383 (1,278) 43 981 (937) 136 593 (457)$50,901 - $81,450 628 2,653 (2,025) 240 1,820 (1,581) 456 1,238 (782)$81,451 - $85,500 141 374 (233) 53 247 (194) 75 171 (96)$85,501 - $102,600 691 1,609 (918) 252 1,058 (807) 350 722 (372)

More than $102,600 4,351 6,907 (2,557) 3,345 5,405 (2,060) 3,985 3,976 9

Total 5,916 13,659 (7,743) 3,932 10,061 (6,129) 5,039 7,032 (1,992)





51

Table 23 (continued)Projected Housing Supply versus Worker Household Need for Ownership Units, 2005-2025San Mateo County Housing Needs Assessment; EPS #15099


Scenario 1 (4)$0 - $30,550 0 19 (19) 88 1,634 (1,546)

$30,551 - $50,900 0 29 (29) 501 2,986 (2,485)$50,901 - $81,450 21 58 (37) 2,304 5,769 (3,464)$81,451 - $85,500 14 8 6 476 799 (323)$85,501 - $102,600 57 28 29 2,275 3,418 (1,143)

More than $102,600 1,322 135 1,187 21,380 16,424 4,956

Total 1,414 277 1,137 27,024 31,029 (4,005)

Scenario 2 (5)$0 - $30,550 0 19 (19) 37 1,634 (1,597)

$30,551 - $50,900 0 29 (29) 284 2,986 (2,702)$50,901 - $81,450 36 58 (22) 1,359 5,769 (4,409)$81,451 - $85,500 24 8 16 293 799 (506)$85,501 - $102,600 98 28 70 1,391 3,418 (2,027)

More than $102,600 2,270 135 2,134 13,950 16,424 (2,473)

Total 2,427 277 2,150 17,315 31,029 (13,714)





52

Table 24Projected Housing Supply versus Worker Household Need for Rental Units, 2005-2025San Mateo County Housing Needs Assessment; EPS #15099


Scenario 1 (4)$0 - $30,550 0 868 (868) 0 734 (734) 150 566 (415)

$30,551 - $50,900 155 1,284 (1,129) 109 1,150 (1,041) 364 896 (532)$50,901 - $81,450 723 1,912 (1,189) 513 1,827 (1,314) 825 1,328 (503)$81,451 - $85,500 132 219 (87) 103 226 (123) 116 161 (44)$85,501 - $102,600 407 593 (186) 372 734 (361) 437 547 (110)

More than $102,600 1,831 1,820 11 2,544 1,926 618 1,801 1,199 602

Total 3,249 6,696 (3,447) 3,641 6,597 (2,956) 3,693 4,697 (1,004)

Scenario 2 (5)$0 - $30,550 0 868 (868) 0 734 (734) 63 566 (503)

$30,551 - $50,900 97 1,284 (1,187) 51 1,150 (1,099) 206 896 (690)$50,901 - $81,450 453 1,912 (1,459) 240 1,827 (1,587) 489 1,328 (839)$81,451 - $85,500 83 219 (136) 48 226 (178) 71 161 (90)$85,501 - $102,600 255 593 (338) 174 734 (559) 265 547 (282)

More than $102,600 1,147 1,820 (674) 1,192 1,926 (734) 1,202 1,199 3

Total 2,034 6,696 (4,662) 1,706 6,597 (4,891) 2,296 4,697 (2,401)





53

Table 24 (continued)Projected Housing Supply versus Worker Household Need for Rental Units, 2005-2025San Mateo County Housing Needs Assessment; EPS #15099


Scenario 1 (4)$0 - $30,550 0 9 (9) 150 2,177 (2,026)

$30,551 - $50,900 0 15 (15) 628 3,345 (2,717)$50,901 - $81,450 7 20 (13) 2,069 5,088 (3,019)$81,451 - $85,500 5 3 2 357 608 (252)$85,501 - $102,600 24 12 12 1,240 1,885 (645)

More than $102,600 255 26 229 6,431 4,972 1,459

Total 291 85 206 10,874 18,075 (7,200)

Scenario 2 (5)$0 - $30,550 0 9 (9) 63 2,177 (2,113)

$30,551 - $50,900 0 15 (15) 354 3,345 (2,991)$50,901 - $81,450 13 20 (8) 1,195 5,088 (3,893)$81,451 - $85,500 9 3 6 210 608 (398)$85,501 - $102,600 42 12 30 736 1,885 (1,150)

More than $102,600 437 26 411 3,978 4,972 (994)

Total 500 85 415 6,536 18,075 (11,539)





54

Table 25Projected Housing Supply versus Worker and Non-Worker Household Need, 2005-2025San Mateo County Housing Needs Assessment; EPS #15099


Scenario 1 (4)$0 - $30,550 88 5,036 (4,948) 150 6,709 (6,558) 238 11,745 (11,507)

$30,551 - $50,900 501 5,058 (4,557) 628 5,666 (5,038) 1,128 10,724 (9,596)$50,901 - $81,450 2,304 8,361 (6,057) 2,069 7,373 (5,305) 4,373 15,734 (11,361)$81,451 - $85,500 476 1,058 (582) 357 806 (449) 833 1,864 (1,031)$85,501 - $102,600 2,275 4,533 (2,258) 1,240 2,500 (1,260) 3,515 7,033 (3,518)

More than $102,600 21,380 19,801 1,580 6,431 5,994 437 27,811 25,795 2,016

Total 27,024 43,847 (16,823) 10,874 29,048 (18,174) 37,898 72,895 (34,997)

Scenario 2 (5)$0 - $30,550 37 5,036 (4,999) 63 6,709 (6,646) 100 11,745 (11,645)

$30,551 - $50,900 284 5,058 (4,774) 354 5,666 (5,312) 638 10,724 (10,086)$50,901 - $81,450 1,359 8,361 (7,001) 1,195 7,373 (6,178) 2,554 15,734 (13,180)$81,451 - $85,500 293 1,058 (765) 210 806 (596) 504 1,864 (1,360)$85,501 - $102,600 1,391 4,533 (3,142) 736 2,500 (1,765) 2,126 7,033 (4,907)

More than $102,600 13,950 19,801 (5,850) 3,978 5,994 (2,016) 17,929 25,795 (7,866)

Total 17,315 43,847 (26,532) 6,536 29,048 (22,512) 23,851 72,895 (49,044)



Ownership Units Rental Units Total UnitsHousehold Income (1)


55

Table 26Projected Housing Supply versus Worker and Non-Worker Household Need, 2005-2014San Mateo County Housing Needs Assessment; EPS #15099


Scenario 1 (4)$0 - $30,550 40 2,266 (2,227) 68 3,019 (2,951) 107 5,285 (5,178)

$30,551 - $50,900 225 2,276 (2,051) 282 2,550 (2,267) 508 4,826 (4,318)$50,901 - $81,450 1,037 3,762 (2,725) 931 3,318 (2,387) 1,968 7,080 (5,112)$81,451 - $85,500 214 476 (262) 160 363 (202) 375 839 (464)$85,501 - $102,600 1,024 2,040 (1,016) 558 1,125 (567) 1,582 3,165 (1,583)

More than $102,600 9,621 8,910 711 2,894 2,697 196 12,515 11,608 907Total 12,161 19,731 (7,570) 4,893 13,072 (8,178) 17,054 32,803 (15,748)

Scenario 2 (5)$0 - $30,550 17 2,266 (2,250) 28 3,019 (2,990) 45 5,285 (5,240)

$30,551 - $50,900 128 2,276 (2,148) 159 2,550 (2,390) 287 4,826 (4,539)$50,901 - $81,450 612 3,762 (3,151) 538 3,318 (2,780) 1,149 7,080 (5,931)$81,451 - $85,500 132 476 (344) 95 363 (268) 227 839 (612)$85,501 - $102,600 626 2,040 (1,414) 331 1,125 (794) 957 3,165 (2,208)

More than $102,600 6,278 8,910 (2,633) 1,790 2,697 (907) 8,068 11,608 (3,540)Total 7,792 19,731 (11,939) 2,941 13,072 (10,130) 10,733 32,803 (22,070)



Household Income (1)Ownership Units Rental Units Total Units


56


November 30, 2006


CONCLUSIONS

Future housing supply in San Mateo County is expected to fall significantly short of providing the needed new housing associated with projected levels of economic growth. These housing deficits will inevitably have some mix of the following negative consequences: further overcrowding and overpayment; increased commute times and costs; air quality impacts; and limitations on economic growth. In 2000, significant levels of overcrowding and overpayment were recorded in San Mateo County. Without a significant increase in housing production levels, especially for households with incomes below moderate levels, these conditions will worsen. Increasing numbers of households will live at levels of more than one person per room and pay over 30 percent of their income on housing. In addition, the limited housing production itself will lead to housing price increases above the rate of inflation, further exacerbating the problem. Increasing numbers of households will seek housing further away in more affordable counties, including outside of the nine‐County San Francisco Bay Area. Employers who already report a lack of housing as a number one concern in Silicon Valley may choose to relocate and others may choose never to come to San Mateo County given the difficulties their employees will have finding housing. While ABAG’s projected job growth included in this analysis may be optimistic, only a significant reduction in job growth would bring projected housing need and supply into balance. Indeed, Countywide job growth would need to be about half of the projected level for the overall housing supply (under the more optimistic projection) to balance housing need.14 In other words, without additional efforts to increase housing supply, job growth between 2005 and 2025 would need to be about 69,000 jobs rather than the projected 133,000 jobs not to outpace housing supply.

14 Even at a reduced level of job growth, there would still be a deficit of housing affordable to some of the lower income households.


VI. AFFORDABILITY GAP AND LINKAGE FEES

The previous chapters documented the continued housing affordability challenge based on a comparison of the projected housing need and housing supply. This chapter considers the financing implications of this gap. More specifically, it estimates, at a planning‐level, the subsidy required to close the gap between development cost and affordable housing payment. In addition, this chapter estimates the linkage fee required if new workspace development in San Mateo County were required to supply the necessary financing to close the gap between the incomes’ of the new associated workforce expected to reside in San Mateo County and the cost of providing housing. In reality, numerous other funding sources and policy approaches will be required to address the affordability challenge as the cost burden would be financially infeasible for new workspace development to bear. Nevertheless, the analysis provides the underpinnings of a commercial linkage fee nexus study, if such an approach were selected by any San Mateo County jurisdictions.

AFFORDABILITY GAP

The affordability gap is defined as the difference between the total development cost and the affordable housing payment, based on standard HUD definitions. Actual development costs will vary significantly by location, construction type, and other factors. Planning‐level estimates of development costs as well as the maximum affordable housing payment associated with each income group are described below and the resulting affordability gap estimated. The focus of the analysis is on rental housing as this is the most common type of affordable housing.

AFFORDABLE HOUSING PAYMENTS

Table 27 shows the maximum affordable housing payment associated with each income category. The affordable housing payment is based on the HUD‐provided annual income of a three‐person household for each income category and HUD’s requirement that housing payments are no greater than 30 percent of household income. As shown, the most a household falling in the extremely low‐income category (35 percent of median income) could pay is about $9,200 each year or $765 per month. In contrast, a household making above 150 percent of median income could pay over $38,500 per year or $3,200 per month. It should be noted that the affordable housing payments are calculated for the highest income earners in each income category and thus represent a high estimate of affordable housing payment across the whole group.

Table 27Affordable Housing Income Range, 2005San Mateo County Housing Needs Assessment; EPS #15099

Income Category Income Range % of Median Income Annual Income Annual Monthly

Extremely Low Income 0%-35% 35% $30,550 $9,165 $764Very Low Income 35%-60% 60% $50,900 $15,270 $1,273Low Income 60%-95% 95% $81,450 $24,435 $2,036Median Income 95%-100% 100% $85,000 $25,500 $2,125Moderate Income 100%-120% 120% $102,600 $30,780 $2,565Above Moderate Income >120% 150% $128,250 $38,475 $3,206

(1) As qualified by HUD affordable housing payments are set at 30% annual income.

Sources: Department of Housing and Urban Development; Economic & Planning Systems, Inc.

Annual Income for 3 person HHAffordable Housing

Payment (1)

Economic & Planning Systems Inc., 11/30/2006 P:\15000s\15099SanMateoHsng\Model\15099HsngNeed_112906.xls59


November 30, 2006


Table 28 converts the affordable housing rental payment into a capitalized value based on typical apartment operating costs and current capitalization rates. As shown, the capitalized values supported by the rental payments range from about $42,000 for extremely low income households to $520,000 for households with incomes of 150 percent of median income.

Development Costs and Affordability Gap

Development costs vary significantly based on site location and condition, project design and amenities, among others. For the purposes of this evaluation, a planning‐level total development cost of $350 per square foot is used. This development cost is based on a review of average costs from other affordable apartment development projects in the Bay Area and includes land costs. As shown in Table 29, the prototype development used in this case is a 1,000‐square foot, two‐bedroom apartment. As a result, the total development cost is $350,000 per unit. Table 29 also shows the affordability gap per unit by income category. The affordability gap is defined as the difference between the development cost and the supported capitalized value. As shown, there is an affordability gap for households in the extremely low, very low, low, and median income categories. Subsidies will not typically be required to develop rental housing for households making over 100 percent of median income. The required subsidy per unit reduces as the household income increases with a $310,000 per unit subsidy required for extremely low income households and a $37,000 per unit subsidy required for median income households. This is a conservatively low estimate of the affordability gap per unit as it assumes all households in each income category earn at the top end of the bracket. In reality, they will spread throughout it.

TOTAL AFFORDABILITY GAP

Table 30 applies the affordability gap per unit to the housing deficit estimated by income category in the prior chapters. A total of 40,100 units are expected to require a subsidy. The total affordability gap/subsidy required is $6.1 billion. About 58 percent of the affordability gap is associated with extremely low‐income households, 32 percent with very low‐income households, 9 percent with low‐income households, and 1 percent with below median‐income households. Geographically, about 43 percent is associated with the North County projected affordable housing deficit, 35 percent with Mid County, and 21 percent with South County. As noted above, this estimate of the affordability gap is conservatively low given the use of the maximum housing payment by income category.

Table 28Income and Affordable Housing Assumptions, 2005San Mateo County Housing Needs Assessment; EPS #15099

Item Note

Extremely Low Income CategoryMultifamily Home Value

Amount spent on rent 30% of 35% of median income (1) $9,165 per yearOperating Expenses $565 per month (2) ($6,780) per yearNet Operating Income $2,385 per year

Supportable Capitalized Value 5.7% cap rate (3) $41,842

Very Low Income CategoryMultifamily Home Value

Amount spent on rent 30% of 60% of median income (1) $15,270 per yearOperating Expenses $590 month (2) ($7,080) per yearNet Operating Income $8,190 per year


Low Income CategoryMultifamily Home Value



Median Income CategoryMultifamily Home Value



Moderate Income CategoryMultifamily Home Value



Above Moderate Income CategoryMultifamily Home Value



(1) See Table 27 for income assumptions.(2) Based on comparable operating expenses for Bay Area rental units.(3) Value Monitor 1st Quarter 2006

Source: Value Monitor; Economic and Planning Systems, Inc.

UnitAssumption


Table 29Unit Characteristics and Per Unit Subsidy RequiredSan Mateo County Housing Needs Assessment; EPS #15099

MultifamilyUnit Type Unit

Development Cost per Unit (1) $350,000

Ability to Pay (2)Extremely Low Income $41,842Very Low Income $143,684Low Income $299,211Median Income $313,158Moderate Income $394,737Above Moderate $519,211

Funding Gap Per Unit (3)Extremely Low Income ($308,158)Very Low Income ($206,316)Low Income ($50,789)Median Income ($36,842)Moderate Income $0Above Moderate $0

(1) Development costs (incl. land cost) for multifamily units are estimated based on a $350/ sq. ft. cost assumptionand an average size of 1000 sq. ft. for a 2 bedroom unit. Based on costs of affordable housing projects throughout the Bay Area.

(2) See Table 28.(3) Difference between development cost per unit and ability to pay. If there was surplus funding gap it was shown as 0 gap in affordability.


Economic & Planning Systems Inc., 11/30/2006 P:\15000s\15099SanMateoHsng\Model\15099HsngNeed_112906.xls

62

Table 30Affordability Gap by Sub RegionSan Mateo County Housing Needs Assessment; EPS #15099

Item Function North County Mid County South County Coastal Total

Households between 0% and 35% of Median Income 4,940 3,960 2,522 85 11,507Subsidy Cost per Extremely-Low Income Unit (1) x $308,158 $308,158 $308,158 $308,158 $308,158Total Cost for Extremely-Low Income Units = $1,522,300,000 $1,220,305,263 $777,044,098 $26,193,421 $3,545,842,782

Households between 35% and 60% of Median Income 4,197 3,409 1,916 74 9,596Subsidy Cost per Very-Low Income Unit (1) x $206,316 $206,316 $206,316 $206,316 $206,316Total Cost for Very-Low Income Units = $866,004,078 $703,266,836 $395,215,916 $15,267,368 $1,979,754,198

Households between 60% and 95% of Median Income 4,893 4,256 2,126 86 11,361Subsidy Cost per Lower Income Unit (1) x $50,789 $50,789 $50,789 $50,789 $50,789Total Cost for Lower Income Units = $248,509,164 $216,142,560 $108,003,451 $4,367,114 $577,022,289

Households between 95% and 100% of Median Income 422 415 200 0 1,037Subsidy Cost per Median Income Unit (1) x $36,842 $36,842 $36,842 $36,842 $36,842Total Cost for Moderate Income Units = $15,554,925 $15,276,641 $7,363,334 $0 $38,194,900

Total Units 14,453 12,039 6,764 245 33,500Average Subsidy Cost per Unit x $183,522 $179,001 $190,378 $187,064 $183,307Total Affordability Gap/ Subsidy Required = $2,652,368,166 $2,154,991,301 $1,287,626,799 $45,827,904 $6,140,814,170

(1) See Table 29.


San Mateo County


63


November 30, 2006


LINKAGE FEE

The size of the housing need at lower income levels and the scale of the aggregate affordability gap pose a significant challenge for policymakers. The full suite of policy and financing tools including inclusionary housing requirements, a commercial linkage fee, tax credits, Redevelopment Agency tax increment funding, and other State and federal funding and programs will be required to start to address this challenge. This section estimates the maximum (full impact) linkage fee that could be charged to new workspace development in the County and discusses alternative fee levels to this maximum. Given that the sum total of all infrastructure/facilities fees on new workspace development must typically be below 10 percent of market value not to make the development infeasible, a commercial linkage fee would only be feasible at a proportion of the maximum fee.

WORKER HOUSING NEED

This analysis considers the worker housing need associated with the occupancy of four workspace development prototypes: • 100,000 square feet of retail space • 50,000 square feet of manufacturing/warehouse space • 20,000 square feet of R&D space • 20,000 square feet of office space The worker housing need in the lower income categories associated with each is based on two primary steps: (1) estimating the number of workers in each development prototype based on typical space requirements per employee for new workspace development in Silicon Valley and (2) the application of the housing needs model, described in the chapters above, to estimate the household formation pattern by income group. The proportion of new worker households that are formed outside of the County is taken into account. Table 31 shows the total new jobs generated by the new development prototypes based on standard worker square feet requirements by space type. It also shows the number of new worker households formed associated with the new jobs by income group (based on the housing needs model). In addition, it shows the proportion of these new San Mateo County worker households expected to live in San Mateo County (about 50 percent based on projected commute patterns).


November 30, 2006


MAXIMUM LINKAGE FEE 15

Table 32 applies the affordability gap by income category from Table 29 to the number of new San Mateo County worker households in the relevant income categories by prototype from Table 31. The total affordability gap by prototype is divided by the prototype square footage to estimate the maximum fee. This results in a conservative estimate of the maximum fee as it is based on the conservative estimate of the affordability gap (see above). As shown in Table 32, the results are as follows: • Retail. Maximum fee of $50.56 per square foot to cover the $5.0 million affordability

gap associated with the retail development prototype.

• Manufacturing/Warehouse. Maximum fee of $36.68 per square foot to cover the $2.0 million affordability gap associated with the manufacturing/ warehouse development prototype.

• R&D. Maximum fee of $43.66 per square foot to cover affordability gap of $965,000 associated with the R&D development prototype.

• Office. Maximum fee of $73.76 per square foot to cover affordability gap of $1.26 million associated with the office development prototype.

FINANCIALLY FEASIBLE LINKAGE FEE

A number of other funding sources and programs will be required beyond the linkage fee to cover the affordability gap for two primary reasons: (1) the linkage fee can only provide funding for the housing need directly associated with workspace development and (2) typical market values of workspace development of about $250 per square foot at the current time suggest that the maximum feasible cost burden, including all fee types, would be about $25 per square foot (measured at 10 percent of market value). As a result, the linkage fee would need to be well below this level, dependent on market conditions and other workspace development cost burdens and fees. Other jurisdictions in California that have adopted linkages, such as the City of Menlo Park, have set the fee well below the maximum/ full impact linkage fee. As shown in Table 32, if the linkage fees are set to cover 10 percent of the jobs‐related affordable housing subsidy need, the fees are between $3.67 and $7.38 per square foot. This fee represents between 50 and 75 percent of the fee currently charged by the City of Menlo Park depending on use type.

15 The maximum fee or full impact fee represents the maximum fee that could be charged based on the nexus between workspace development and housing need. This also represents the full impact fee as it would generate sufficient revenue to cover the full subsidy requirements of the affordable housing needs associated with new worker housing needs in San Mateo County.

Table 31Worker Households by Workspace Per Prototype San Mateo County Housing Needs Assessment; EPS #15099

Manufacturing/ R&D/Item Retail Warehouse "Heavy" Office Office

Building Size 100,000 50,000 20,000 20,000Square Feet per Worker 300 450 350 250Number of Workers 333 111 57 80Number of Households 153 62 31 41Number of San Mateo County Worker Households 76 30 15 21

New Worker Households$0 - $30,550 12 5 2 3

$30,551 $50,900 21 8 4 5$50,901 - $81,450 34 15 7 9$81,451 - $85,500 4 2 1 1$85,501 - $102,600 16 7 3 4

More than $102,600 64 26 14 18

Total 153 62 31 41

New Worker Households Residing in San Mateo County (1)$0 - $30,550 6 2 1 2

$30,551 $50,900 11 4 2 3$50,901 - $81,450 17 7 3 4$81,451 - $85,500 2 1 0 1$85,501 - $102,600 8 3 2 2

More than $102,600 32 13 7 9

Total 76 30 15 21

(1) A 50% discount rate was applied to the total number of household to account for worker households who live outside the San Mateo County.

Sources: Department of Housing and Urban Development; Economic & Planning Systems, Inc.


Table 32Illustrative Employment Linkage Fee CalculationSan Mateo County Housing Needs Assessment; EPS #15099

Item Function Retail Manufacturing R&D Office

Households between 0% and 35% of Median Income 6 2 1 2Subsidy Cost per Extremely-Low Income Unit x $308,158 $308,158 $308,158 $308,158Total Cost for Extremely-Low Income Units = $1,848,947 $616,316 $308,158 $616,316

Households between 35% and 60% of Median Income 11 4 2 3Subsidy Cost per Very-Low Income Unit x $206,316 $206,316 $206,316 $206,316Total Cost for Very-Low Income Units = $2,269,474 $825,263 $412,632 $618,947

Households between 60% and 95% of Median Income 17 7 3 4Subsidy Cost per Lower Income Unit x $50,789 $50,789 $50,789 $50,789Total Cost for Lower Income Units = $863,421 $355,526 $152,368 $203,158

Households between 95% and 100% of Median Income 2 1 - 1 Subsidy Cost per Median Income Unit x $36,842 $36,842 $36,842 $36,842Total Cost for Median Income Units = $73,684 $36,842 $0 $36,842

Total Costs for Affordable Housing Subsidies $5,055,526 $1,833,947 $873,158 $1,475,263Employment Space Growth ÷ 100,000 50,000 20,000 20,000Maximum/ Full Impact Linkage Fee per Square Foot (1) = $50.56 $36.68 $43.66 $73.76

Potential Linkage Fee per Square Foot (2) $5.06 $3.67 $4.37 $7.38(if set at 10 percent of maximum Fee)

(1) The maximum/ full impact linkage fee makes new workspace development financially infeasible.(2) This calculation shows the linkage fee if set at 10 percent of the maximum. This results in a fee that is between 50 and 75 percent of the current Menlo Park fee depending on use type.


Building Type


67


VII. HOUSING ELEMENT UPDATE

This section discusses the relationship between the San Mateo Housing Needs Study and the housing elements that must be periodically updated by the cities and County of San Mateo. Each of the C/CAG members (the individual cities and the County) is required, as a part of their respective state‐mandated general plans, to develop and implement a housing element. Under current statutes these housing elements must be periodically updated on a schedule established by the State Department of Housing and Community Development (HCD). The current schedule calls for the housing elements in the Bay Area to be updated by June 30, 2009, a two‐year extension on the original schedule. HCD, as a part of its housing element requirements, establishes an RHND, pursuant to Government Code Section 65584.02. The RHND establishes targets for local governments to zone land for enough housing to meet projected housing demand across a range of prices based upon family incomes. In the Bay Area the Association of Bay Area Governments (ABAG) has historically been responsible for allocating the RHND to individual member jurisdictions. The ABAG RHND allocation process has long been a source of disagreement and conflict. In response to this problem, and in an effort to make the process more responsive to local conditions and capacities, San Mateo County has been granted the authority to do the RHND allocations for the cities and unincorporated County area. The San Mateo Housing Needs Study, while not resolving or presenting data at the city level is intended to be a current overview of Countywide housing needs and the gap between needs and expected supply. The expression of housing demand/need is based upon an assessment involving the conversion of expected increases in local employment to housing demand and other local factors (see Chapter III). As such, the demand forecast differs from the methodology historically applied by the State and ABAG. Nonetheless, as the cities and County begin their Housing Element updates, the San Mateo Housing Needs Study provides valuable information that can contribute to the quality and consistency of the updated housing elements. The following points summarize how the San Mateo Housing Needs Study can be used in the effort to prepare updates to the cities’ and County’s housing elements. 1. Reviewing market conditions. While regional housing market conditions are continuously changing the Study provides a general County‐wide overview current to 2005 that can contribute to subsequent assessments. The market data included in the Study provides the housing elements with a regional overview and can help with several determinations required in housing elements.


November 30, 2006


2. Assessing housing needs and potential supply. As noted above, the housing needs analysis conducted for this Study differs from the RHND in a number of ways, but primarily because the Study’s demand analysis is driven by the conversion of increased employment to housing demand. This demand analysis is compared to an estimate of potential supply based upon historical rates of housing development and more optimistic ABAG household projections. The resulting comparison indicates a substantial miss‐match between demand and supply, especially for more affordable housing. This implies the need for considerably more housing units than currently expected or even more commuting from surrounding portions of the Bay Area, lower employment levels than projected, or some combination of all of these responses. As C/CAG approaches the RHND process, the housing demand and supply analysis will provide a valuable source of data. 3. Formulating policies and implementation measures. The Study is intended to stimulate a discussion among C/CAG members regarding the County’s housing needs and how these needs could be met, and insofar as they are not met, the potential implications. Key among these implications is the potential for increased congestion on major highways and bridges associated with increased in‐commuting and the possibility that job growth, and related economic development, will be limited by the lack of affordable housing. It is assumed that this discussion will lead to identification of policy initiatives that can be pursued jointly or by the member cities and the County as a part of their individual housing elements. 4. Formulating quantified objectives. Quantified objectives are numerical targets for housing across a range of housing affordability categories. These objectives typically reflect a realistic assessment, given policy initiatives, to meet the RHND allocation. Insofar as the Study results in policy initiatives it can help the cities establish a realistic set of quantified objectives for housing production.

Download - DRAFT REPORTdocumenting the full set of data, analysis, assumptions, and findings follows. Results are provided for the 2005 to 2025, 20‐year period, reflective of typical planning

Top Related